A person needs the necessary goods and services to maintain the average lifestyle. The economics analyzes the expenses of living and the quality of living in a particular region. The cost and quality both are associated with people’s living style and the area where they live.
When people think of moving or relocating to another place, they first think of the money how much they need it to fulfil the basic requirement in life. The economic concept gives a general idea about the location, price, and living style of people. This indeed helps them to live a calculated life.
The cost of living and standard of living are economic concepts. It mainly talks about the cost and quality of life.
Cost of Living vs Standard of Living
The main difference between the cost of living and standard of living is that the cost of living is maintaining the standard of living with the required amount of money by fulfilling the basic needs of life. Whereas the standard of living is the measure of the quality of life a person can live with the facilities available in a place.
The cost of living means maintaining the standard of living with the required amount of money to live in a particular area or location. Basic needs are taken into account as food, shelter, clothing, education, health, and other utilities.
The standard of living is the level of comfort that people can expect with the amount of money that they can make. The standard of living depends mainly on the quality of healthcare and education; income, employment, infrastructure, are also a part of it.
Comparison Table Between Cost of Living and Standard of Living (in Tabular Form)
| Parameter of Comparison | Cost of Living | Standard of Living |
|---|---|---|
| Meaning | It is the calculation or result of the cost that people live in a particular location. | It is the measurement and level of comfort and wealth available in a particular location. |
| Measurement | It is a comparison of expenses to survive in an area. | It is the level of people’s living without comparing their needs. |
| Dependence Factor | It depends on a person’s income | It depends on the material quality of life a person wants to lead. |
| Indicators | It indicates the purchase power parity and cost of living index | It indicates the poverty rate and income of a person |
| Location | It can be measured and determined for an area, a city, a state, or a country | It is measured and determined only with each country |
What is Cost of Living?
The cost of living defines the maintenance of life with the amount of money that is needed to accommodate the basic needs successfully. By fulfilling the basic needs of life such as food, shelter, clothing, education, health, and other utilities.
The cost of living decides the amount you pay to buy the items and services needs. With the help of this, we can compare one place to another place’s cost required to live with basic needs. It gives an update about the changes, modernization, technology, the emergence of industries which increases the cost of living.
By measuring the purchase power parity and cost living index we can indicate the cost of living. The cost living index is the baseline comparison of two different areas. It is useful while planning to relocate to another place, as it gives the difference between the current and another location cost of living.
The cost living index is the hypothetical price measured by the country by analyzing the cost of living people in a particular location. Every quarter, it will be changed by measuring the changes in the price of goods and services as the price will be fluctuating on valuable goods and services.
We can say that the index gives an idea about or compares the cost of living in villages and metropolitan cities. When a person wants to move from his place to another place for the betterment of life or job it helps him on required of cost to lead standard of living with the necessary needs.
The cost of living depends on the wages or income of a person. Comparing the expenses of a living to survive with necessary needs in a particular location is a wise option always.
What is Standard of Living?
The standard of living is defined as the level of people’s comfort and wealth that are available in a particular area or location. It mainly focusses on healthcare and education.
The quality of life is different from the standard of living. The standard of living will not be measured by personal freedom, satisfaction, and relationship. It is measured by the goods and services available to lead a comfortable and wealthy life. The measurement of the standard of living includes the quality of life material.
The two variable that matters in the standard of living, if people have more purchasing power means they have a high income. The quality of life increases if an increase in the rate of poverty reduction by distributing the resources equally.
The standard of living cannot be measured by a single factor. The rate of poverty and real income are the most important indicators of the standard of living.
Some of the factors affecting the standard of living depend on consumer expenditure also, if people spend on basic needs to improve their life. In another way, it increases business and employment opportunity also increases.
If countries exports increase more than imports of goods it creates employment and improves the standard of living.
Main Differences Between Cost of Living and Standard of Living
- The main difference between the cost of living and standard of living is, the cost of living denotes the cost required to pay to live a life with comfortable basic requirements whereas the standard of living means the lifestyle that a place can provide.
- The cost of living is a comparison of expenses to survive in an area. While the standard of living is the level of people living without comparing their needs.
- A person’s income plays a major role in the cost of living while and standard of living depends on the material and quality of life a person wants to lead.
- The cost of living indicates the purchase power parity and cost of living index and the standard of living is indicates the poverty rate and income of a person.
- The cost of living can be measured and determined by area, city, state, or country, and the standard of living is measured and determined only with each country.
Conclusion
Both of these economic concepts revolve around a common man’s life. The cost of living gives the idea about the required money to maintain the standard of living by fulfilling the necessary needs. Cost of living aptly helps in calculating the lifestyle that can be maintained. Standard of living is the benchmark set at a location.
These two concepts are interrelated in the expenditure value. Spending power indicates the growth of a person, standard of living helps to raise the standard of a family too. Philosophically, think big attain big. Moreover, the standard a place has arrived is also because of the government policies. Strategic locations for businesses can easily improve living standards in that place.
References
- https://www.jstor.org/stable/2526406
- https://books.google.com/books?hl=en&lr=&id=BZnNJUulONcC&oi=fnd&pg=PR6&dq=Cost+of+Living+and+Standard+of+Living&ots=K3SYJ7jO8F&sig=uwe7Iz7GX9pGpdzirfWQhIV7PAs
- https://www.aeaweb.org/articles?id=10.1257/jep.12.1.3