Prices differ across geography. So, in order to compare living standards we fiddle with our unit of currency to try to equate prices. Thus we can compare living standards using our now fiddled currency – that’s purchasing power parity.
An example of prices differing. In Bangladesh right now:
Each cabbage and cauliflower are being sold at Tk15-20, white radish, carrot and brinjal at Tk10-15, Tk15-30 and Tk10-25 per kg respectively.
Fine rice is available at Tk58, medium-quality rice at Tk52 and coarse rice at Tk48.
1Tk is about once pence UK or even, at this level of accuracy, 1 cent US.
50 pence a kilo for rice isn’t far out of the Costco or the like price range. This makes sense, rice is a globally traded item, the law of one price comes into effect. Fungible items will be about the same price, including the costs of transport, across geography. This isn’t because they ought to be but because arbitrage through trade across those geographic price differences will make them so. Brinjal is aubergine/eggplant. That’s not so much an internationally traded item. Ten to twenty pence/cents a kilo is pretty damn cheap.
Which is why we use PPP and also how it is calculated.