We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Causes an Increase in Cost of Living?

By Erik J.J. Goserud
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

An increase in cost of living can be driven by a number of things. From an individual perspective, this is generally done by relocating to a place that costs more or moving to a more expensive apartment or house. From a broader locational perspective, such an increase is driven by classic economical principles like supply and demand.

It is common knowledge that different areas have varied costs of living associated with them. New York City, a notoriously expensive place, does not cost the same to live in as Landisville, Pennsylvania. There are reasons for this, however, as New Yorkers charging seven US Dollars (USD) more for a fast-food meal are not arbitrarily doing so to punish visitors.

Economics is a very complicated science, which studies the decisions people make that drive market behavior. Markets can be thought of as any medium 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. The supply refers to the amount of a good available, and demand describes how much is desired by people. The relationship between these two factors can dictate prices.

These two variables can cause an increase in cost of living in certain circumstances and are generally inversely related. If something is heavily desired, there is probably not 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 jousting for housing in a relatively small area, property owners can charge much more because they know someone out there needs the space and is willing to hand over the money for it.

The opposite is true when a good is not wanted. If no one wants a fork that doubles as a straw, then the inventor of this "fraw" will probably have to virtually give it away at a low cost. Urban settings, due to the complexity of their markets and high demands, offer an increase in cost of living as opposed to less dense areas. This is not always true, though, as many desired rural residences can be expensive due to popularity.

A person can increase his or her own cost of living by changing his or her lifestyle. This lifestyle change may be locational or situational. A situational change that causes an increase in cost of living could be a person deciding to eat at fancier restaurants or to buy a car with higher payments. A locational example is a person deciding to move from a farm in central California to an apartment in Los Angeles.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Discussion Comments

By KoiwiGal — On Jun 09, 2014

@pleonasm - Unfortunately there isn't really a choice in a lot of cases. The cost of living isn't the only thing people are considering, after all. School districts, the local community and so forth are also things to consider.

I don't know why but cost of living in general seems to have gone up so much in the last few decades. It used to be so much easier to live well off a job based around unskilled labor. These days you will barely get by if you have two of them.

By pleonasm — On Jun 09, 2014

@Fa5t3r - One thing I don't think gets considered enough is the time factor. It might be cheaper to live out in the suburbs even if you add up the price of travel to work, but you might be spending a couple of hours or more commuting per day and that's a big chunk of daylight hours where very little will get done.

This might be a bit cynical, but if you put an hourly wage on those travel hours and add that to the bill for living in a place far from your work, you might end up seeing a different picture.

By Fa5t3r — On Jun 08, 2014

I'm always kind of shocked by the differences in prices between places that aren't even that far away from each other. I guess it's got something to do with how far they are from the source of the food or something like that, but fruit and vegetables seem like they can almost double in price depending on where you go.

But then, it's never as simple as checking the local stores. You have to factor in your own transport to and from work and your rent and school fees and so forth. It might seem like an inner city apartment is expensive until you look at all the other factors.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.