As an Icelander I can assure you that both of those things were not imported. Icelanders are just a bit greedy by nature, which is why this tourist bubble will burst eventually. Stick to the supermarkets especially "Bónus" and don't enter the 10-11 shop unless you're drunk. Then you will be fine. Kebab places are also pretty well priced; go to Mandi, owned by Syrian refugees, one of the most friendliest places to eat at. If you want Icelandic cousine, go to a store called "Melabúðin" a 20min walk from downtown. They have pre-heated sheep heads, sheep balls and fermented shark at a resonable price Edit; Bónus is the pink capitalistic swine, they have two stores downtown.
Eating out is on the expensive side looking at the menu prices, but after factoring in that it includes taxes and tip it’s not far off.
Groceries were about the same. Skyr is cheaper though since it’s made locally. And it’s amazing.
Many of the attractions were free but gas is more expensive.
We stayed in an apartment that was like $700 USD for the week for a family of four.
Local municipal hot pools (read: not blue lagoon) were downright cheap. We went with a 2 and 3 year old so we spent plenty of time there. Blue lagoon is quite expensive, as is the food there, but it is gorgeous.
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So beautiful though, I always hear of photographers traveling there, feels like I’m the only one who hasn’t gone.