Sample Business Studies Paper on Relationship Between the Cost of Living and Inflation

Relationship Between the Cost of Living and Inflation

The cost of living and inflation are two critical economic indicators that are closely related to each other. Inflation raises the overall increase in properties and facilities over a period, while the cost of living refers to the money individuals or households need to meet their basic needs. The cost-of-living results from inflation, as the rising prices of goods and services increase the amount of money people need to sustain themselves.

Various factors, such as increased demand for goods and services, high production costs, and limited supply, cause inflation. When demand for goods and services exceeds the supply, prices increase, leading to inflation and higher amounts (Inflation and the Cost of Living | J.P. Morgan Research, 2022). This, in turn, affects the existing price, as individuals have to use much finance to buy the same goods and services they were buying before.

Inflation also affects the cost of living by reducing the purchasing power of money. When prices increase, people need more money to buy the same goods and services, which decreases their purchasing power (Pettinger, 2022). This means that people have to work longer hours or earn more money to maintain their standard of living.

The relationship between the cost of living and inflation is closely linked. Inflation affects the cost of living, as rising prices increase the money needed to meet basic needs. At the same time, the cost of living also affects inflation, as increased demand for goods and services contributes to higher prices. It is essential to understand this relationship, as it helps policymakers and individuals better prepare for inflation’s impact on the cost of living and take appropriate measures to mitigate its effects.

 

 

Works Cited

Inflation and the Cost of Living | J.P. Morgan Research. (2022, September 14). Www.jpmorgan.com. https://www.jpmorgan.com/insights/research/inflation-cost-of-living

Pettinger, T. (2022, March 9). How Inflation Affects Your Cost of Living. Economics Help. https://www.economicshelp.org/blog/167965/economics/how-inflation-affects-your-cost-of-living/