Difference Between Similar Terms and Objects

Difference between Cost of Living and Standard of living

Difference between Cost of Living and Standard of living

Though they are closely related, the two concepts agree and complement each other. The two concept are largely used by statisticians as indicators of the prevalent economy within a given geographical location.

The cost of living is a cost that maintains a specific level of living, in a given geo location. 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 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.

Definition of terms

Cost Of Living

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. It indicates how a country is fairing economically and it changes as time changes.

The cost of living is indicated through the measure of a Cost of Living Index and the Parity of the Purchasing Power.

The Cost of Living Index

This index is a hypothetical price index that measures the living cot over time in 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. The index is best used to compare the cost of living amongst different countries.

Purchasing Power Parity

To measure the cost of living, this variable utilizes the difference in currencies to measure the cost of living.

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. Thus, it is correct to extrapolate that there is a difference in the cost of living, among the countries that use different currencies.

Difference between Cost of Living and Standard of living-1

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.

Many factors are included as necessities in the measuring of the standard of living. 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.

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. 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.

For the standard of living, there are two variables that matter. The availability of more income, means that people have a higher purchasing power. At the same time, the rate of poverty reduction increases and the quality of life increases, thus enabling more equitable distribution of resources.

A comparative Analysis between the Cost of Living and Standard of Living

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. 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 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.

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. 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 Key Differences between Cost of Living and Standard of Living

Definition

The cost of living is the cost that maintains a given level of living in a particular geographical area.

The standard of living on the other hand is a country’s indication of general comfort, necessities, and, wealth and material properties.

Measurement

The Cost of Living is measured by the Purchasing Power Parity and the Index of the Cost of Living. The standard of living on the other hand is measured through multiple indicators that collectively provide a single inference.

The difference in how the two are measured takes into account the fact that, for the cost of living, the Purchasing Power Parity and the Cost of Living Index are easily obtainable and it is easy to draw a comparison from the two. However, for the standards of living, the above mentioned factors, have to be calculated first then compounded to form a complex assessment of the conclusion.

Location

The cost of living can vary, and can be measured within cities, states, countries and regions. For the standard of living the estimation is only calculated in a country. The real reason why the two would vary is that while the cost of living can be inferred from a micro economy or a macro economy, the standard of living can only be obtained from a macro economy.

Function

The cost of living is more significant in matters about personal wealth accumulation. A small salary can be enough when living in a city that does not cost a lot to live in. on the other hand, a large salary can seem insignificant against the needs that come along with living in a city that is expensive. The cost of living is not a force to beckon with, as the standard of living. While people pursue credit to raise their standard of living, they cut costs and run on budgets to reduce the cost of living.

The standard of living on the other hand, is used to compare how geographical areas thrive economically. It is also used to compare specific times in a given geographical area. The standard of living can be used to analyze how a country faired in the past, and how it is faring currently.

When the standard of living improves, the correct interpretation of the matter would be; the same amount of work will buy you more goods, services, and properties that were once considered luxuries. The standard of life has helped more people have access to refrigerators, and vehicles. The life expectancy also increases when the standard of living increases.

Summary

The two entities that are focal in this discussion are closely related, beyond any doubt, in the sense that the cost of living is the price for keeping within a certain standard of living. The cost of living cannot be controlled by any interventions that stem from the government since it is mainly dependent on the resources’ demand and supply, within a geographical area.

However, initiatives can be taken by world organizations and governments, to improve the standards of living in countries, or even in the world.

Note Cost of Living Standard of Living
Definition The cost that people incur to live in a given geographical area. A country’s indication of comfort, wealth, possessions and needs
Measurement The major indicators of the cost of living are The Cost of Living Indicator and the Purchasing Power Parity The standard of living

Is measured through multiple indicators such as GDP, political stability etc. that collectively provide a single inference.

 

Location The cost of Living can be determined for a micro economy such as a state or city or for a macro economy such as a country or a region. The standard of living is a representative of the whole and can be measured, only within the context of a macro economy i.e. a  country
Function The cost of living matters more when it amounts to the accumulation of wealth and cutting of costs to keep the cost of living low. The cost of living is not predetermined and cannot be controlled by any government initiatives. The standard of living is an economic indicator of how a nation is thriving, and can be predetermined by government plans and targets.

In conclusion, the main idea of the standard of living can be vividly contrasted with the quality of life that the cost of living subjects people to. There are more intangible aspects to consider such as leisure and all must be well measured to draw the cut between how the cost of living and standard of living differ. Though there may also be politico- economic tendencies that tend to shift the paradigms of the standards of living, countries that share a similar standard of living may have very varied costs of living. This can mean that some people will pay more and spend more to achieve a given standard of living, than they would, given a few more amenities.


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References :


[0]Chien, Nina C., and Rashmita S. Mistry. “Geographic Variations in Cost of Living: Associations With Family and Child Well-Being.” Child Development 84.1 (2013): 209–225. Web.

[1]Economist Intelligence Unit (EIU). “Worldwide Cost of Living 2014:” The Economist 67.1 (2016): 14. Print.

[2]Federal Reserve Bank of Boston. “HOW DO WE MEASURE Standard of Living.” Federal Reserve Bank of Boston 1 (2016): 1–5. Print.

[3]https://www.flickr.com/photos/lselibrary/3269532550

[4]https://www.flickr.com/photos/37603091@N02/8147700813

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