A person needs the necessary goods and services to maintain the average lifestyle. Economics analyzes the living expenses and the quality of living in a particular region.
When people think of moving or relocating to another place, they first think of the money and how much they need it to fulfill the essential requirement in life. The economic concept gives a general idea about people’s location, price, and living style.
The cost of living and standard of living are economic concepts. It mainly talks about the cost and quality of life.
Key Takeaways
- Cost of living refers to the amount of money required to maintain a certain level of living, including the costs of goods and services such as housing, food, transportation, and healthcare; standard of living is a broader measure of the overall quality of life in a given area, encompassing factors such as income, employment, education, and life expectancy.
- The cost of living is a specific measure of the financial requirements to maintain a certain lifestyle. In contrast, the standard of living is a more comprehensive assessment of well-being and quality of life.
- Both costs of living and standard of living are important indicators of economic and social conditions. Still, the cost of living focuses on the financial aspects of maintaining a lifestyle, while the standard of living evaluates the overall quality of life and well-being.
Cost of Living vs. Standard of Living
The difference between the cost of living and the standard of living is maintaining the standard of living with the required amount of money by fulfilling basic life needs. Whereas the standard of living measures the quality of life, a person can live with the facilities available.
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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 include food, shelter, clothing, education, health, and other utilities.
The standard of living is the level of comfort people can expect with the amount of money they can make. The standard of living depends mainly on the quality of healthcare and education; income, employment, and infrastructure are also a part of it.
Comparison Table
| 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 needed to accommodate 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 you need. With the help of this, we can compare one place to another place’s cost required to live with basic needs.
We can indicate the cost of living by measuring the purchase power parity and cost-living index. The cost-living index is the baseline comparison of two different areas.
The cost-living index is the hypothetical price measured by the country by analyzing the cost of living for people in a particular location. Every quarter, it will be changed by measuring the prices of goods and services as the prices fluctuate 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 with the required cost to lead a standard of living with the necessary needs.
The cost of living depends on the wages or income of a person. Comparing the expenses of 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 available in a particular area or location. It mainly focuses 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.
The two variable that matters in the standard of living is if people have more purchasing power, which 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.
A single factor cannot measure the standard of living. The rate of poverty and real income are the most important indicators of the standard of living.
Some factors affecting the standard of living depend on consumer expenditure if people spend on basic needs to improve their life. In another way, it increases business, and employment opportunity also increases.
If a country’s 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 the standard of living is that the cost of living denotes the cost required to live a life with comfortable basic requirements, whereas the standard of living means the lifestyle a place can provide.
- The cost of living compares expenses to survive in an area. At the same time, the standard of living is the level of people living without comparing their needs.
- A person’s income plays a significant 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 indicates a person’s poverty rate and income.
- The cost of living can be measured by area, city, state, or country, and the standard of living is measured and determined only in each country.
- 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
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
