You don't even have to go to other countries to see differences in prices for the same goods. I recently moved from Denver to San Francisco. Basically everything in San Francisco is 2x as expensive. Housing is more like 7x as expensive. But wages are higher.
I really don't have a good intuitive understanding of what this
means. If San Francisco people only spent money in San Francisco, you could just factor it in to some inflation figure. But an XBox costs the same in S.F. as it does in Denver. Likewise with cars, etc. It's economically identical to what happens when one country locks its exchange rate against a foreign currency. The rest of the US is basically locking its exchange rate 1:1 to S.F. money, even though in S.F. there's a
lot more sloshing around in people's pockets.
It's one of the paradoxes of our modern world I don't really understand. Near as I can tell it means that people in the larger cities are artificially richer than people in smaller cities just through implicit currency manipulation. I would think that, if you put aside the inefficiencies of actually converting currencies, trade within the US would be improved by having the major cities have their own currencies that can float against the rest of the nation.
After all, in absolute terms, it probably doesn't require any more resources to live in a big city, since things like electricity and water can benefit from economies of scale. 50K in S.F. dollars might only be 20K elsewhere in the country.
But I'm just talking out my ass

It's been too long since macroeconomics for me to really think clearly about it.