What Factors Affect the Cost of Living for an Area

Several factors affect the cost of living for an area. Cost of living affects the poor most as compared to the impact on the rich. This is because they are mostly responsible for the rising of cost of living. The government is responsible for the well-being of the citizens of its country. The government should ensure that the economy is high and bringing down the cost of living. This is favorable to everyone in the country, the rich and the poor. Low cost of living reduces the number of crimes in a country. This is because the prices of goods and services needed for everyday life becomes affordable. The following are some of the factors that affect the cost of living for an area.

National income factors

This is one of the main factors that affects the cost of living in an area, specifically a country. In order for the cost of living to be high, the national income should also be high. The cost of living is the amount needed to purchase goods and services that people need in everyday life. For instance, food is necessary every day, and the cost of living rises if the money needed to purchase food is high. This means that few people can afford it. Cost of living goes up mostly because of inflation. During inflation, a large amount of cost increases are in the household sector and this leads to the cost of living going up. This is good for the business people if people can afford to buy the products, but it affects the poor since an increase in prices means they are not able to purchase anything with the one dollar they have unlike earlier when they could.

Geographical difference factors

Some areas are productive while some are not. For instance, areas that have nutritious soil enough to grow food for commercial purposes, living of these areas will be low as compared to areas that are not productive. The other difference is areas that are rich in minerals are more productive than areas without. Cost of living in these areas is low as compared to areas without minerals. This is because the area that grows food does not have to rely so much on buying food unlike the areas whose land is not productive.

Currency factors and their affect on cost of living

This is yet another major factor that affects the cost of living in an area because differences in currency will determine whether that country is economically productive or not. For instance, most people in Africa rely on the U.S dollar to do their business. Most of these businesses are in the global market. When the price of the dollar goes up, it often devalues the currency of that country. The cost of living then rises because of the devaluation of the currency. This affects countries that have their business branches in these other countries because when the country is doing poorly economically, the businesses will also do poorly. Investors withdraw from investing in such countries and especially businesses that are located in these countries.