Since the US dollar became the official currency in 2000 the cost of living has definitely gone up. A trip to Ecuador will be a bit more expensive than a trip to Peru or Bolivia. However, apart from certain excursions, you won't find daily life too expensive.
In the whole of Latin America, Ecuador is not the cheapest destination. That wasn't so before 2000, which was when the US dollar replaced the sucre as the official currency. Since then the prices have soared. Thankfully, it is still possible to live at a reasonable cost in Ecuador.
Accommodation won't cost you a fortune provided you aren't too worried about comfort. Then the prices go up according to the quality of the accommodation. Be careful during holiday periods or in tourist centres because the prices can climb and even double. The most expensive room's going to be on the Galapagos Archipelago.
It's the same thing for eating. The restaurants are not expensive and the dishes are generally rich and hearty. If you don't have a sensitive stomach then try sitting at one of the little plastic tables in one of the many markets. It's even cheaper and often even more tasty than anywhere else. If you pay a little more for restaurants in town it won't be so much for the quality of the food as because you are happier with the general hygiene!
Transport is also not at all expensive. The bus is very economical and you can meet some interesting people as you travel all over the country on it.
In the end, the only expense that is really likely to make a big hole in your budget is excursions. But after all, that's why you're there! Going into the Amazonian jungle, or to the top of Chimborazo or Cotopaxi, is very expensive. And as for a trip to the Galapagos, you should look at the prices before you decide.
When it comes to accommodation, the cheapest double rooms are around $13 (£8.50). Obviously, prices go up according to the type of hotel and how comfortable it is, to around $75 (£48). These prices can double in tourist centres and during holiday periods.
When it comes to eating, you can have a full meal for less than $4 (£2.50). If you want a candlelit dinner for two in a trendy restaurant then you might have to shell out as much as $21 (£13.50) for a single dish.
When it comes to getting about the bus is still the most economical. In town a trip is less than $0.20 (15p). For long distances, it depends on where you are going and how comfortable you want to be. To give you an idea, you need to spend about $1 (65p) for every hour on the road. Internal flights are quite good value, but you won't get to the Galapagos for less than $420 (£270). And once you are on the archipelago, the prices are at least 3 times higher than on the continent. It's the same for the Amazon where an expedition into the jungle will cost about $53 (£34) per person per day, and for climbing Cotopaxi which is around $265 (£160).