Because of its isolated location, low population, and high standard of living, Iceland is widely regarded as an expensive tourist destination. In general, the costs of many goods and services, including food, lodging, and transportation, are more expensive than they are in a great number of other countries.
The cost of accommodation can be quite high, with costs for hotels, hostels, and guesthouses typically being higher here than they are in other European vacation spots. In addition, the costs of automobile rentals and gasoline are relatively high.
Food prices can also be quite high, with things that are supplied regionally, such as seafood and lamb, commanding especially high prices. Eating out at restaurants may be costly as well, despite the fact that there are some meal selections that are more friendly to one’s wallet.
You can save money on your vacation in Iceland by camping, cooking your own meals, taking advantage of the free water, and doing things like sightseeing and hiking that don’t cost anything. However, there are other methods to cut costs. It is possible to have a trip that is memorable and fun without having to spend a lot of money if you put some thought into planning and create a budget before you go.
After spending the last few years traveling across a number of different countries, I can state with confidence that the prices in Iceland are pretty comparable to those in Switzerland, with the exception of a few items. The Big Mac Index has sometimes been used to compare prices around the world. However, since the last McDonald’s in Iceland closed almost ten years ago, this is no longer an exact science to compare prices. In the United States, a Big Mac now costs $5.15 USD, which is equivalent to 736 ISK given the current exchange rate. At this price, I really doubt that you will be able to find a hamburger in Iceland. In Switzerland, a Big Mac costs about 1014 ISK, which is a very good price for a large hamburger in Iceland.
To answer your question, I would say that Iceland is an expensive country if you want to stay in the best hotels, eat the best food, and drink the best drinks. However, it is possible to live on a budget in Iceland and still experience all the magic.