COST OF LIVING AND STANDARD OF LIVING. Cost of living refers the overall degree of optimum costs of the goods and services which an average person can afford, for his basic requirements in a given period of time while Standard of living is taken into account to the degree of money and prosperity which can be the purchasing power, that individuals enjoy in a specific country. To some, this has to do with a nation’s GDP in view of cost of living and standard of living
GDP which stands for gross domestic products of a nation does not directly compare to the average lives of a common man on the street
what is cost of living
Definition of cost of living, Cost of living may be defined as the amount of money an individual spends to obtain the goods and services which will sustain him at a particular time. It is thus the money cost of things as food, shelter, clothing, medical services, etc. which the individual consumes.
The cost of living depends largely on the prices of goods and services, if prices are high, the cost of living will be high, since the individual will have to spend more money to obtain goods and services. But if the prices are low, less money will be spent, hence the cost of living will be low.
WHAT IS STANDARD OF LIVING
Standard of living may be defined as the level of economic well-being or welfare attained by individuals in a country at a particular time. The level of welfare is determined by the quantity and quality of goods and services consumed within a period of time.
The higher the quantity and quality of goods and services consumed, the higher the standard of living and vice versa. The income per head and the distribution of income are used in measuring the standard of living in relation to cost of living and standard of living
RELATIONSHIP BETWEEN COST OF LIVING AND STANDARD OF LIVING
Cost of living, as explained above, largely depend on the prices of goods and services which are consumed.
If the prices of goods and services are high, this means an increase on the cost of living since people have to pay more money to get them. If prices increase, people purchase fewer goods and services. They therefore consume less and this results to a fall in their standard of living.
On the other hand, if prices of goods and services fall, people will be able to obtain them in greater amounts. This means a fall in the cost of living. They would also purchase high quality goods and services. This will increase their level of consumption and their standard of living will increase.
In summary, a rise in the cost of living reduces the standard of living, while a reduction in the cost of living increases the standard of living. It is the cost of living that determines the standard of living.
Difference between cost of living and standard of living
The main difference between the cost of living and standard of living is that the Cost of living is the amount of money required to support a specific way of life by bearing the cost of expenses like lodging, taxes, food, and medical care, whereas the Standard of living is firmly associated with the quality of life
- economic tools for nation building
- factors affecting the expansion of industries
- mineral resources and the mining industries
- demand and supply
- how companies raises funds for expansion
cost of living and standard of living
Importance of production and factors of production
Production is important because of the following:
- Availability of goods and services: Production helps to ensure that goods and services are made available for use by human beings.
- Improvement in standard of living: Production helps to ensure adequate improvement in the standard of living of many people.
- Provision of employment: Continuous production ensures the employment of many people.
- Increase in wealth of people: Production assists people to accumulate wealth as a result of continuous employment.
- Increase in export potential: Production also assists a state or nation to boost her export of goods and services to other nations.
- Acquisition of skills: The engagement of people in production leads them to acquire special skills
FACTORS OF PRODUCTION
Factors of production refer to agents, components or resources which are combined together to produce goods and services. There are four factors of production. These are: