Finally found a video that helped me wrap my head around PPP. So many other sources mentioned "a basket of goods" but not what that term actually meant.
I’m 18, I wanted to take statistics so I could better understand world bank metrics and such but lacked the prerequisites in math for my freshman year. I feel like I have a basic understanding of this stuff now, and I really appreciate your explanation, it was very clear and helpful :)
Accounting is the systematic process of recording, analyzing, summarizing, and reporting financial transactions of a business or organization. It plays a fundamental role in managing the financial affairs of a company, providing essential information for decision-making, financial planning, and performance evaluation..
In an interconnected world, many companies operate on a global scale. Global marketing involves understanding cultural differences, adapting marketing strategies to different markets, and navigating international
4:41. Another way to look at it (and get the same result) is if USA's GDP is 16. Japan's GDP is 18, and if the cost of living is 3 times higher in Japan (A Big Mac is 6 dollars in Japan vs. just 2 dollars in the US, (as seen above), then US GDP would become 48 PPP (3 times 16) vs. 18 PPP for Japan (no change to Japan GDP.). By reducing this by dividing both by 3, you get 16 and 6. The problem with PPP is that though goods and services may be cheaper in one country, the person might not be able to travel as a tourist or purchase a college education in a foreign country where goods and services are more expensive (or buy an iPhone, etc. or country A with PPP GDP of 1 trillion won't have the same buying power as Country B with a nominal GDP of 1 trillion dollars, when it comes to oil (which is the price in dollars ) or buying an f-16 jet from the US unless Country A PPP GDP is the same as it nominal GDP such as US, or a country so where the price of a big mac in that country is the same as in the US) ), so 20,000 us dollar in country A might have the same buying power as 40,000 us dollar in the USA, but that 20,000 might not be enough to pay for tuition at a US college or to travel to the US and have the same buying power as a person in the US with a 40,000 dollar income. A second problem with PPP is that though goods and services might be cheaper in Country A, the quality might not be the same as in the US, so a bus ride in Country A might cost 1 US dollar vs. 3 US dollars in the USA, it might not run on schedule, ..... because of not enough buses, might be slower, etc.... and internet service might be cheaper but slower ... there might be longer waiting time to see a medical doctor or receive treatment though the cost might be lower than in the US. People pay for the quality of goods and services, so it costs more to watch a movie in HD than in SD, A college lab with 50 students is not the same as one with 25 students, a television (way back in the days) with no remote or just one station, is not the same as a television today. A streaming service with insufficient shows and movies is different from one with.
You can say it much simpler than that, since the usa’s gdp equivalentes to 8 baskets of goods while Japan can only buy 3, japans gdp is simply 3/8ths of the US’
So is this number actually calculated with the Big Mac index or was that just an example? When look up a random country on Wikipedia and go to the GDP PPP Per capita, is it based on Big Macs?
I want to choose a country to move to and the most important criterion for me is how much money I can save from my salary after all monthly expenses (after paying for housing and utilities, after paying for food and hygiene products, etc.), please tell me the rating that shows this , maybe it is GDP PPP per capita?
thank you great explanation but can u explain how from ppp i can actually know what my salary's value is actually as compared b/w different countries for example if i earn 100k in us and 100 k in japan by how much is 100k's value more in us than in japan
Imagine the UK has mostly external assets in euro and external liabilities in sterling. In case that sterling is depreciating against the euro. Explain what will happen to the net foreign asset position of the UK?
A very clear explanation. However, I am a little confused. If a basket of goods is 8 Big Macs costing U$ 2 = U$ 16, in Japan would the PPP be $6 x 8 Big Macs = $48?
Which basically means that when in the US the $16 gets you 8 Big macs...Now for you to get the same quantity (8) of Big macs in Japan @ $6 each you would need to have $48.
GDP@PPP is WITH RESPECT TO a particular country. It is just like fixing an axis so that one can compare economies. Here in this video, USA has been taken as reference hence GDP@PPP is calculated W.R.T. US(taking US cost for big mac). If you want to calculate same W.R.T. Japan then it would be $48 (8*$6) for US and $18 (3*$6) for Japan.
Actually the GDP at PPP for the US would be listed as 48 dollar for US and 18 dollars for Japan ( not 16 and 6 but somehow he reduces it to 16 and 6 ) since the ratio of 48: 18 is the same as 16: 6 since ( in this made up example) the cost of living is 3 times in Japan than in the US, so US GDP of 16 dollars (when compared to Japan ) became 48 dollars (16 multiply by 3), and Japan remained at 18 dollars ppp ( so Japan Gdp in ppp is the same as its nominal GdP of also 18 dollars)
Thank you sir. I'm new to economics and I'm trying to understand this term. So to calculate the purchasing power parity, we need to know to price of the product? Basically, I am struggling to understand this concept outside of your bigmac example -- which definitely helped me understand more. But my question remains. :) hope this makes sense.
Eventhough your explication of Purchasing Power was insightful, you did not elaborate on the fact that Purchasing Power Parity actually makes a prediction about what the exchange rate should be given the price levels in two countries. This is because differences in prices across countries should be reflected in the relative price of the currencies which are the exchange rates. If this does not hold there is an arbitrage possibility given that e.g. external Purchasing Power is higher than internal Purchasing Power.
why does it imply that the yen is overpriced, if the GDP was also measured in dollars? wouldn't it mean that the GDP was overvalued in the same ratio? and the end result ratio doesn't care of the price of yen?
Why is the cost of goods different in different countries and if they are cheaper in one country but has a lower GDP, how does the country have a higher GDP?
The cost of a basket of goods will be different in most countries due to costs of production, inflation rates, taxation, exchange rates etc. In this instance, the lower GDP is reflecting the actual amount of goods and services that can be purchased assuming one dollar has equivalent purchasing power in both countries.
@@gconomics3766 Thank you for the reply ! I have to do a study for PPP and was thinking to compare the cost of living in different countries this way to find out like in the video if the currency is under appreciated or otherwise. Would it be relevant to use the minimum wager instead of the GDP because i want to refer to an individual instead of a country ?
In his example, the US has the higher PPP (at 48 dollars, he reduces that 48 to 16 and reduce Japan 18 to 6) since cost of living is three times higher in Japan and the US nominal GDP was listed as 16 dollars. . Both countries would have the same PPP if the US nominal GDP was 6 dollars (since Japan is given as 18 and then US 6 dollars x 3 would give 18 dollars )
G Conomics. I live in indonesia... And i wanna ask you more... What is the real GDP per capita of my country?? I see many people rich in here.. But with many poor people too.. Inequality is quite high.. Because our geography is Archipelago.. Its make it harder to share the wealth across the country
Wait what!?!?. A big mac?. Should raw materials that is available in every corner of the world like gold, silver and bronze or iron be a standard for such a calculation?.
![ภาพนี้ก็ฮาเหมือนกันนะเนี้ย #1 SS8 [ พากย์นรก MEME.EXE ] | easy boy](http://i.ytimg.com/vi/Ytc50m91QK8/mqdefault.jpg)
Lighting at the end a bit frightening mate.
Lol it scared the s outta me
Idk what i was expecting but it wasn’t that😭
You warned me and yet nothing could prepare me for it when it happened
Fuc had dozed of watching this and suddenly it happened. Thought a bomb went of with my woofer setup 🤣
I thought tbe lighting will change at the end
Finally found a video that helped me wrap my head around PPP. So many other sources mentioned "a basket of goods" but not what that term actually meant.
Thanks, pleased it was useful.
So the basket of goods for purchasing power parity, they are using only big Mac MC Donald prices? Not other good or services ?
@@kurniawan5723 no
Well done mate. You've helped this first-year BSc econ student. Thank you
Got a jumpscare at 5:30 lol :0
I mean 5:40 xD
RIP headphone users @ 5:39
Haha, apologies!
RIP myself haha
haha!
I was warned... And I still jumped, lol
Thanks for the heads up😂😂
As a former Econ major refreshing some of the topics I learned in school, this was a great explanation using a clear example. Thanks for the video!
Great to hear!
Finally, I have understood what PPP means. Thanks for the simple and consice explanation.
Glad it was helpful.
I’m 18, I wanted to take statistics so I could better understand world bank metrics and such but lacked the prerequisites in math for my freshman year. I feel like I have a basic understanding of this stuff now, and I really appreciate your explanation, it was very clear and helpful :)
Accounting is the systematic process of
recording, analyzing, summarizing, and
reporting financial transactions of a
business or organization. It plays a
fundamental role in managing the
financial affairs of a company, providing
essential information for decision-making,
financial planning, and performance
evaluation..
Quality of content: 10/10
Quality of marker: 2/10
Great video, thanks for the straight forward explanation.
really you are so great , best simple explanation, thanks alot
In an interconnected world, many companies
operate on a global scale. Global marketing involves
understanding cultural differences, adapting marketing
strategies to different markets, and navigating international
Very good explanation, thank you very much!
4:41. Another way to look at it (and get the same result) is if USA's GDP is 16. Japan's GDP is 18, and if the cost of living is 3 times higher in Japan (A Big Mac is 6 dollars in Japan vs. just 2 dollars in the US, (as seen above), then US GDP would become 48 PPP (3 times 16) vs. 18 PPP for Japan (no change to Japan GDP.). By reducing this by dividing both by 3, you get 16 and 6.
The problem with PPP is that though goods and services may be cheaper in one country, the person might not be able to travel as a tourist or purchase a college education in a foreign country where goods and services are more expensive (or buy an iPhone, etc. or country A with PPP GDP of 1 trillion won't have the same buying power as Country B with a nominal GDP of 1 trillion dollars, when it comes to oil (which is the price in dollars ) or buying an f-16 jet from the US unless Country A PPP GDP is the same as it nominal GDP such as US, or a country so where the price of a big mac in that country is the same as in the US) ), so 20,000 us dollar in country A might have the same buying power as 40,000 us dollar in the USA, but that 20,000 might not be enough to pay for tuition at a US college or to travel to the US and have the same buying power as a person in the US with a 40,000 dollar income.
A second problem with PPP is that though goods and services might be cheaper in Country A, the quality might not be the same as in the US, so a bus ride in Country A might cost 1 US dollar vs. 3 US dollars in the USA, it might not run on schedule, ..... because of not enough buses, might be slower, etc.... and internet service might be cheaper but slower ... there might be longer waiting time to see a medical doctor or receive treatment though the cost might be lower than in the US.
People pay for the quality of goods and services, so it costs more to watch a movie in HD than in SD, A college lab with 50 students is not the same as one with 25 students, a television (way back in the days) with no remote or just one station, is not the same as a television today. A streaming service with insufficient shows and movies is different from one with.
Devon Devon thank you so much , it is going to help me on my midterms
You can say it much simpler than that, since the usa’s gdp equivalentes to 8 baskets of goods while Japan can only buy 3, japans gdp is simply 3/8ths of the US’
Quality is always better than Quantity
@@g.f.8983 Glad you find it helpful
I have watched longer videos yet struggled to make sense of them. But this is very precise and simple to understand.
Great video for those looking for a simple explanation for PPP. Cheers.
Your username 💀💀
That was beautiful!
Thank you, very helpful. That lightning was a bit hair-raising though....
good explanation , now im understand about gdp ppp :)
Can’t believe I’m watching this video right now, not even for school or anything
This us a very simple and easy to understand explanation! Thank you so much... now I understand it
Excellent!
Dude that outro scared the hell out of me!! Thanks for the video though..
So helpful! Thank you!
Outro still scares me Mr Clarke!
Very helpful, thank you.
Great video! thanks
Best explanation on youtube, thank you.
Awesome! Clear and concise!
棒棒哒！简洁易懂！
Glad it was useful.
Jump scare at the end lmao
Simple illustration 👌
Very helpful!
Best explanation and the way you explain sir is Amazing.. Thanks
Thanks and welcome
So is this number actually calculated with the Big Mac index or was that just an example? When look up a random country on Wikipedia and go to the GDP PPP Per capita, is it based on Big Macs?
So please tell us what are the basket of goods and services that are considered while calculating ppp of a country
Excellent explanatio
Glad it was useful
Thank you, now i understand
Finally, I can comprehend it. Thanks bro.
You're welcome
As an American, Nominal GDP is grade A copetanyl from the west. Purchasing Power Parity is more of a true measure.
Feeling like a Goldman Sachs partner
I want to choose a country to move to and the most important criterion for me is how much money I can save from my salary after all monthly expenses (after paying for housing and utilities, after paying for food and hygiene products, etc.), please tell me the rating that shows this , maybe it is GDP PPP per capita?
great vid
fun fact: China has the highest PPP in the world
thank you great explanation but can u explain how from ppp i can actually know what my salary's value is actually as compared b/w different countries for example if i earn 100k in us and 100 k in japan by how much is 100k's value more in us than in japan
Quick! Someone tell me where I can buy a $2 Big Mac!
Thanks from Belgium!
Welcome!
terimakasih sekarang saya jadi paham
Perfect explanation, thanks
Glad it was helpful!
the ending almost gave me a heart attack
Good explanation! Thx.
Thanks ... pleased it was helpful.
Imagine the UK has mostly external assets in euro and external liabilities in sterling. In case that sterling is depreciating against the euro. Explain what will happen to the net foreign asset position of the UK?
Beauty♡
Nice explanation!!!
Glad it was useful
This lecture is so helpful!!
Glad it was helpful.
Muchas gracias por el video
You are welcome!
A very clear explanation. However, I am a little confused. If a basket of goods is 8 Big Macs costing U$ 2 = U$ 16, in Japan would the PPP be $6 x 8 Big Macs = $48?
Which basically means that when in the US the $16 gets you 8 Big macs...Now for you to get the same quantity (8) of Big macs in Japan @ $6 each you would need to have $48.
GDP@PPP is WITH RESPECT TO a particular country. It is just like fixing an axis so that one can compare economies. Here in this video, USA has been taken as reference hence GDP@PPP is calculated W.R.T. US(taking US cost for big mac). If you want to calculate same W.R.T. Japan then it would be $48 (8*$6) for US and $18 (3*$6) for Japan.
Actually the GDP at PPP for the US would be listed as 48 dollar for US and 18 dollars for Japan ( not 16 and 6 but somehow he reduces it to 16 and 6 ) since the ratio of 48: 18 is the same as 16: 6 since ( in this made up example) the cost of living is 3 times in Japan than in the US, so US GDP of 16 dollars (when compared to Japan ) became 48 dollars (16 multiply by 3), and Japan remained at 18 dollars ppp ( so Japan Gdp in ppp is the same as its nominal GdP of also 18 dollars)
so kindly explain to me deeply, among USA and JAPAN, which one has the highest purchasing power regarding the above given exam? Thanks
best regards
So wouldn’t GDP PPP per capita be the most meaningful statistic?
i try to understand all those strategies of Purchasing power in parity
Good explanation and thx dude
No problem 👍
Either way, this only applies to regular people, rich people don't care, as it doesn't affect them much at all.
PLEASE CAN YOU UPLOAD MORE FOR THE GCSE SPEC, PLEEEEEAAAAASSSEE!
I will be uploading one video per week on each extract.
Good video. Wished I'd not watched at 0400hrs with Sony headphones though 05:39 😂
Amazing video thank you
Glad you enjoyed it
Thank you, sir!
Glad it was useful.
Thank you sir. I'm new to economics and I'm trying to understand this term.
So to calculate the purchasing power parity, we need to know to price of the product?
Basically, I am struggling to understand this concept outside of your bigmac example -- which definitely helped me understand more. But my question remains. :)
hope this makes sense.
This is a helpful article: www.economist.com/free-exchange/2012/06/08/return-of-the-mac
@@gconomics3766 thank you!
Eventhough your explication of Purchasing Power was insightful, you did not elaborate on the fact that Purchasing Power Parity actually makes a prediction about what the exchange rate should be given the price levels in two countries. This is because differences in prices across countries should be reflected in the relative price of the currencies which are the exchange rates. If this does not hold there is an arbitrage possibility given that e.g. external Purchasing Power is higher than internal Purchasing Power.
help full
why does it imply that the yen is overpriced, if the GDP was also measured in dollars? wouldn't it mean that the GDP was overvalued in the same ratio? and the end result ratio doesn't care of the price of yen?
Kindly take care of that lightning sound!
for one second i though you were Berlin from casa de papel
It doesn't include property prices though?
great video
Thanks!
Driving me insane when someone keeps "writing" with a marker that doesn't work. UGH
Why is the cost of goods different in different countries and if they are cheaper in one country but has a lower GDP, how does the country have a higher GDP?
The cost of a basket of goods will be different in most countries due to costs of production, inflation rates, taxation, exchange rates etc.
In this instance, the lower GDP is reflecting the actual amount of goods and services that can be purchased assuming one dollar has equivalent purchasing power in both countries.
UNIT 3
Hello ! I have a question , is the GDP written on the table the GDP per capita or is it the min wager in the specific country ? I'm really confused :(
It's a hypothetical value for the country's GDP - just to make the numbers easy to work with.
@@gconomics3766 Thank you for the reply ! I have to do a study for PPP and was thinking to compare the cost of living in different countries this way to find out like in the video if the currency is under appreciated or otherwise. Would it be relevant to use the minimum wager instead of the GDP because i want to refer to an individual instead of a country ?
@@mikehowlington4020 Have you looked at the Big Mac Index as published by The Economist magazine?
@@gconomics3766 I've looked on online versions of it , sadly i can't buy one where i live :(
@@mikehowlington4020 Register and you can read the article : www.economist.com/news/2020/01/15/the-big-mac-index
best video about ppp
Glad it was useful
GDP by PPP high is good? When high, can we purchase more goods?
In domestic higher PPP = better life.
Except it's more subsidised in the USA.
That outro lmao
What is in the basket of sales in this video?
With ppp china already number one after 2013.
Nobody uses Ppp for that though
Why does the US PPP not reduce to $8?
James Lester if it reduced to $8, the US could only purchase 4 Big Macs rather than 8.
Does that mean that the yen is overvalued
Keenan Patel yes, that is correct.
Thanks
No problem
Wtf? Lightning fright
I scared me also.
SO WHO HAS HIGHER PPP?
In his example, the US has the higher PPP (at 48 dollars, he reduces that 48 to 16 and reduce Japan 18 to 6) since cost of living is three times higher in Japan and the US nominal GDP was listed as 16 dollars. . Both countries would have the same PPP if the US nominal GDP was 6 dollars (since Japan is given as 18 and then US 6 dollars x 3 would give 18 dollars )
the bigMac is not the same in every country
How is the Big Mac a thing you can get every where lol try a tomato or like a fish
I suppose it can differ depending on the local conditions, while BigMac is the same product from equally same amount of resources
Iam confused with my country.. Gdp ppp of my country is 3 times than nominal GDP
Please clarify your question.
G Conomics. My country have 4000 USD Per Capita Nominal GDP.
And 13000 USD GDP PPP.
Why?
It will be a consequence of the purchasing power of the USD in your country - where do you live?
G Conomics. I live in indonesia... And i wanna ask you more... What is the real GDP per capita of my country??
I see many people rich in here.. But with many poor people too.. Inequality is quite high.. Because our geography is Archipelago.. Its make it harder to share the wealth across the country
Wait what!?!?. A big mac?. Should raw materials that is available in every corner of the world like gold, silver and bronze or iron be a standard for such a calculation?.
meh