How come the same products are priced differently in different countries? Like if a Snickers bar costs 2$ in the US it’ll cost 30 cents in Ukraine. Do companies loose money this way?
In: Economics
There’s a couple important things in play.
First, cost to make the product. If a snickers is made in the US, then they have to have a factory in the US, paying prices for land, electricity, supplies, and labour in the US. That means from *nothing* to *Snickers* has some costs that are going to be different depending on where it’s made.
The second is where they maximize profit based on what people will pay.
So let’s say I make a Snickers bar for 15 cents. I can charge 16 cents and sell a *lot* of them, but not for a lot of profit per bar. Similarly, I can charge $10 per bar, and make a lot of profit per bar, but not sell that many. There’s a peak to this graph, where I get to make the most profit. The tricky part is that, in different parts of the world, that peak will be different. In countries with more money, paying a bit more for a chocolate bar is more acceptable to enough people to make it more profitable. In other countries with less money, you might need to sell more bars at a lower profit per bar to make the most possible money.
There’s actually a really interesting analysis of all these factors called the Big Mac Index. Essentially, a Big Mac is, for all intents and purposes, almost **identical** no matter where in the world you are. This means we can compare all the costs associated with acquiring raw ingredients, and all the labour in preparing it, along with what people are willing to pay. Based on the Big Mac Index…
> The Ukrainian hryvnia is 61% undervalued against the US dollar
https://www.economist.com/big-mac-index
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