SAME PRODUCTS, DIFFERENT PRICES AROUND THE WORLD
Have you ever wondered why some products that are the same in content, package, and size have various prices from place to place? For example, a dozen eggs that costs $2.29 in Los Angeles is priced at $0.39 in India. A pound of banana costs $0.59 in Portland, Oregon, and $0.25 in Brazil. A 2-liter Coca-Cola bottle costs $1.48 in Little Rock, Arkansas, and is worth $0.78 in South Africa. Why is this? In other words, why is the exact same thing different in value around the world?
Knowing the reason behind this is essential in understanding how it works. Let’s have a concrete example. Take into consideration the prices of a 32 GB iPad 2, a 16 GB iPhone 4, and a MacBook Air. If you buy these three items in the US, for example, New York, they will cost you $2,745. In Tokyo, Japan, you will need to pay $2,225 for the same three items, while in Brazil’s Sao Paulo it is sold at $4,160.
All kinds of the items are sold at various prices depending on the location. Cars, gas, and even water costs are different everywhere.
Import taxes and duties
The major reason behind why prices vary from place to place is import taxes and duties. As mentioned above, Japan has cheaper prices because it has a way lower import taxes and wholesale prices compared to Brazil that has a very high import duty and therefore a much costlier prices of imported goods. And this is not only about countries. There are discrepancies even inside the United States.
The VAT or value-added tax is a factor for varying prices. In some places like London, the VAT is at 20%. In Manila, Philippines, it is 12%. Meanwhile, the VAT in California is generally around 8%. This means that a given product is distributed among the mentioned places at the same price, but it will be sold at a different price to consumers because of the value-added tax.
Another factor is the place itself. One of the best examples of this is Saudi Arabia with its low gas prices. Saudi Arabia is the world's biggest oil exporter, thus it has more access to it. At the same time, the price of water is extremely high there compared to other countries as it is a desert country. The laws of supply and demand also affect the prices of goods.
Varying perceived value
Another factor for different prices is a perceived value. This is how a country or a place perceives the value of a good. This factor sets aside the price of production in the selling price. An example of this is branding. A common brand in one country might be sold as a premium brand in another one. This means that sometimes, the price of a product will depend on how a consumer values it.
Doing business in different places costs differently as well. This factor relies on an economy of a place. A country having high living costs usually has a higher price for conducting business. Hiring staff, keeping business venue, and paying delivery costs affect greatly the final cost of a product.
All in all, prices of products are different because of the place itself. But regardless of the reasons, it is always the consumer who will feel the weight of prices. This can help us get an insight into where our money is going and whether the things we buy worth the price we pay for them.
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