Big Mac Index

The Big Mac Index is published by the Economist and is used to demonstrate the idea of Purchasing Power Parity (PPP) and is a method of showing whether a currency is under or overvalued in relation to the US Dollar.

The theory behind PPP is that all currencies should be equal, not in nominal terms, but in purchasing terms. So I should be able to purchase a good in the UK using Pound Sterling for the same price as if I were to change my money into Euros and purchase the exact same good in France (ignoring transaction costs). Why is this? [...]