Why is the cost of living higher in the developed countries than the developing countries ? Any economics here

Question

Serious answers please.

Answer 1

The official exchange rate for currency of poor countries  is usually as much as two or three times less than  the purchasing power parity exchange rate.

http://en.wikipedia.org/wiki/Penn_effect

This make imported good very expensive in the local currency so to maintain the      standard of living that people have in developed countries  with all the conveniences cost nearly the same everywhere, but labor is very cheap. However the locals live and a very low standard and many are subsistence framers. Land and local produce is relatively cheap because there are few rich people to bid up the price.

Answer 2

This is a question of PPP (Purchasing Power Parity), or how many goods and services your money can buy. For example, the Gross Domestic Income per Capita in South Africa is of about 5000$, however with that money you can buy as many goods and services as you would be able to buy with 10,000$ in the US. So we say the income per person in south Africa averages 10,000$ in terms of PPP, but the nominal income is 5,000$ .

For someone going to a Less Economically Developed Country (LEDC) from an industrialised country, the cost of living would be very low as he/she would be able to buy many goods/services (eg. 5000$ will buy you the equivalent of  10,000$ when you go to south Africa). However, 10,000$ is still a very low income (people in wealthy countries earn 3 or 4 times that amount), so living would be tougher for the average  South African than it would be for the average European or Australian.

Someone living in an industrialized country may have a nominal income of 40,000$, but only 35,000$ in terms of PPP. In this case, a person coming from South Africa would have a difficult time since his actual wealth would be reduced (in South Africa he would be able to buy 10,000$ worth of goods but here he could only buy 4,500$ worth).

Hope this answers your question?

Answer 3

It is because of consumerism. A child in Chinca does not go to school with i pods. He doesnt have a Wii at home. A kid in India does not have PSP but a lot of books which are subsidised. This doesnt mean they dont have fun. Most of poor countries have a strong social structure. China is growing at 10% and India at9% though people have less jobs and less opportunity. The reason is that there is less consumerism and more export.

Answer 4

Simply put, it's because people in in the developed countries have more net-worth PPP than people in developing countries. So, purchasing-power is more and to limit people's consumption (so that they don't consume everything), most prices are intentionally raised to reduce their purchasing-power. Otherwise, we would become the GREAT CONSUMERS (like a Lion) and not GREAT PRODUCERS (like trees) which the world wants.

If you don't want so, develop digital robots that do surplus production everywhere to reduce prices globally.