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Economics/Differences in prices, wages and rents


QUESTION: First of all, congratulations on the website. It seems like a good idea! Here´s my question:

I was wondering what drives differences in prices, wages and rents in Big Cities of central importance, in comparison to other Regular Cities of the same country. (i.e. New York, Tokyo, London, etc)

Are there differences in prices of goods (i.e. in supermarkets or in street stores of big cities versus "regular" cities)? and services? why is that? . Are there differences in wages from Regular Cities to Central Big Cities, for the exact same qualification and skills?

I assume that these differences arise from higher costs with Rents; Therefore, also labour will be costlier due to higher cost of living.

And finally, why should a goods producing company or factory locate itself in a big city if it bares higher labour costs and higher rents?

Thank you in advance!

ANSWER: Thank you for your query.  This is not an easy question. However, you may already know that the cost of living in big cities tends to be higher than in smaller ones.  E.G. New York city, just a subway ride out of Manhattan and you find prices for the same items being 20% or even 50% lower than in Manhattan. Why? In the case of Manhattan real estate is very expensive.  Store leases are far expensive than counterparts in suburbs or other Boroughs thus driving the prices up. Only chains will reflect the same prices, usually. another issue driving prices up in Manhattan, as an example, is the cost of parking or getting a ticket for parking on the street.  This makes deliveries more difficult than in less crowded areas where the driver may leave the van on a driveway and ring a bell or unload the goods with no issues.
Hope this helps. Overhead in big cities is higher, rents and leases are higher and so are the real estate taxes. Hope this helps.  However, salaries may not reflect the higher overhead. That explains why people move out of the city and commute --more space for less money.

---------- FOLLOW-UP ----------

QUESTION: Thank you for your answer.
When you say " Only chains will reflect the same prices, usually. " are you refering to differences in prices from Big Cities to Regular Cities or still on that Manhattan example?

I am referring to drugstores in the same metropolitan areas, e.g. Walgreens, CVS, or Department Stores like Macy's, or stores like Target, Sears, and the like. You may not see a price difference on the same items in them or at least significant one.  for example: if you buy shampoo in Walgreens in Manhattan and then you go to a Walgreens on Long Island and buy the same brand, the price won't be different. However, a mom and pop store would reflect the higher overhead in Manhattan vis-a-vis Long Island.  Hope this helps.


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