The Key Differences between Cost of Living and Standard of Living Definition This can be seen when people make a choice to take credit to attain a given standard of living that is within a cost of living that is way beyond their means. The availability of possessions that people feel they are entitled to, the more they work towards attaining the objects, even when they do not have the finance to obtain them. The standard of living is not a natural cause and can be determined by governments with the need to assess how its developmental targets shall be achieved, and to have a periodical assessment of how the percentage population that hits the target. Once the standard of living goes high, then it is possible to say that life will cost more for individuals to maintain the standards. The relationship between the cost of living and the standard of living is inseparable, for the very fact that the presence of one, affects the presence of another. A comparative Analysis between the Cost of Living and Standard of Living At the same time, the rate of poverty reduction increases and the quality of life increases, thus enabling more equitable distribution of resources. The availability of more income, means that people have a higher purchasing power. However, the most important and vital indicators of the standard of living are: the real income of a person after inflation is adjusted, and the rate of poverty.įor the standard of living, there are two variables that matter. The standard of living cannot be estimated by one singular measure of the standard of living, since it is made up of the many indicators listed above. Amongst the most important indicators income, the rate of poverty, the ability to afford quality housing, the ability to attain quality employment, the education available and its quality, the rate of inflation, the expectancy of life, the occurrence of disease, the political and economic stability, and the freedom of religion and worship. Many factors are included as necessities in the measuring of the standard of living. The standard of living is the measure of how much a given geographical location, a country to be precise is: wealthy & comfortable, and their valuables and necessities. Thus, it is correct to extrapolate that there is a difference in the cost of living, among the countries that use different currencies. It is a theory which states that the rate of exchange between two currencies is equal to the ratio of the purchasing power of the currencies. To measure the cost of living, this variable utilizes the difference in currencies to measure the cost of living. The index is best used to compare the cost of living amongst different countries. The index is availed quarterly and it considers the price of services and goods, allowing for the substitution with other valuables as prices fluctuate. This index is a hypothetical price index that measures the living cot over time in countries. The cost of living is indicated through the measure of a Cost of Living Index and the Parity of the Purchasing Power. It indicates how a country is fairing economically and it changes as time changes. The cost of living is defined as the cost incurred to maintain a certain level of living in a given geographical location, say a country. The complementarianism existing between the two variables is that, in a place where the standard of living is high, then it is highly likely that the cost of living is very high. On the other hand, the standard of living is a measure of how wealthy and comfortable a people in a geographical location, indicated by their material property, and the goods they need. The cost of living is a cost that maintains a specific level of living, in a given geo location. The two concept are largely used by statisticians as indicators of the prevalent economy within a given geographical location. Consumer Price Index for All Urban Consumers (CPI-U): U.S.Though they are closely related, the two concepts agree and complement each other.
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