The cost of living can increase due to supply and demand, with highly desired goods or services leading to higher prices. This can be seen in urban environments where demand for housing is high. Lifestyle changes can also increase the cost of living, such as moving to a more expensive area or buying a more expensive car.
An increase in the cost of living can be driven by a number of things. From an individual perspective, this is usually done by relocating to a place that costs more or moving to a more expensive apartment or house. From a broader location perspective, such an increase is driven by classical economic principles such as supply and demand.
It is common knowledge that different areas have different costs of living associated with them. New York City, a notoriously expensive place, doesn’t cost the same to live as Landisville, Pennsylvania. However, there are reasons for this, as New Yorkers who charge seven US dollars (USD) more for a fast food meal are not doing so arbitrarily to punish visitors.
Economics is a very complicated science, studying the decisions people make that drive market behavior. Markets can be thought of as any means through which a good or service can be purchased from a buyer. Cities are giant markets, for example, with many goods available to eager consumers. Supply refers to the amount of a good available, and demand describes how much people want it. The relationship between these two factors can dictate prices.
These two variables can cause the cost of living to increase in certain circumstances and are generally inversely related. If something is highly desired, there probably won’t be much left. The need for the product also allows the seller to charge more per unit. In a city, for example, where there are many people fighting over housing in a relatively small area, landlords may charge much more because they know someone needs the space and is willing to part with the money.
The opposite is true when you don’t want a good. If nobody wants a fork that doubles as a straw, then the inventor of this “fraw” will probably have to give it away virtually at little cost. Urban environments, due to the complexity of their markets and high demands, offer an increase in the cost of living compared to less dense areas. However, this is not always true, as many desired rural residences can be expensive due to popularity.
A person can increase their own cost of living by changing their lifestyle. This lifestyle change can be local or situational. A situational change that causes the cost of living to rise could be a person deciding to eat at fancier restaurants or buy a car with higher payments. An example of placement is a person who decides to move from a farm in central California to an apartment in Los Angeles.
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