Despite the fact that rental rates for commercial space and labor costs are generally higher in big cities than small towns; the prices of many products - such as electronics and clothing - are higher in small towns than in large cities. Can you explain this?
Competition. Labor costs less because the number of jobs available can be much lower and there is more competition for the jobs. In big cities, it costs more to hire good talented, skilled people because there are more in the pool with more jobs available to choose from. However, the costs are higher for products because there are fewer places to buy products. The competition is more fierce, with the price going up due to higher demand but ...
The solution explains why rental rates for commercial spaces and labor costs are generally higher in big cities than smaller towns.