In this case I compare the same basket in Brazil. It gets curiouser when comparing with other countries. Interestingly, the iPhones are nearly what would be “expected” price. In this particular case Apple TV and the iPad are “overpriced” significantly.
What the chart shows is that not all Apple products are treated equally by Apple.
The surcharge can be interpreted as “how much more does a buyer in a different country pay over the price in the US (excluding US sales tax) plus VAT and duties.” I then took the difference between the “expected” and actual prices as a fraction of the expected and called that the “surcharge”. I called this “Finland (expected)” price and it’s shown in green. I also calculated what the price in Finland “should” be if the products were sold with the known VAT of 23% added. I illustrated the price of a basket of Apple products in the US online Apple store in blue and the same products in the Finnish online Apple store where the prices were converted to US dollars in yellow. However, knowing the retail price of an Apple product in a particular location, and knowing the tax and duties levied, can we work out if the price is consistent? In addition to regulations there are duties levied and there are sales or consumption taxes levied on the purchase. However, laws do not permit the import and friction-free trading of electronic products. It makes the products “liquid” in that they can be easily bought and sold across borders. An unlocked iPhone is the same everywhere. They sell the same exact product in all countries. I guess there’s a premium on special sauce over there.Apple’s products are globally consistent. When adjusted for GDP, we can see where Big Macs are actually expensive: Brazil, Argentina, and Sweden. The chart above shows a strong positive relationship between the dollar price of a Big Mac and GDP per person. Average prices should be lower in poor countries than in rich ones because labour costs are lower. But we have long warned that cheap burgers in China do not prove that the yuan is massively undervalued. In other words, the raw Big Mac index suggests that the yuan is 44% undervalued against the dollar. At market exchange rates, a burger is 44% cheaper in China than in America. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of a basket of goods and services around the world. The Economist updates their Big Mac Index, which as we all know, is the most accurate way to measure the global economy:
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