| This paper looks at the causes of increasing cost of living by studying two (2) main factors |
| This paper looks at the causes of increasing cost of living by studying two (2) main factors; firstly, the slow growth in income as compared to inflation, and secondly the unproportional increase in standard of living as compared to income. For the first factor, a time series regression model was constructed using the data from Household Income Survey report (various years) to compare the fluctuation in income against the inflation rate year-on-year. For the second factor, we studied the expenditure elasticity of income for the household. A log-log linear regression model was developed taking into consideration the three (3) main groups of goods that household buys: Food, Transportation and Housing. We have studied the elasticities across income strata (B40, M40, T20) and location (Rural vs Urban) to observe the changes in elasticity with respect to those variables. The result of this study points that income growth has indeed surpasses inflation rate from year to year, however the standard of living is increasing at a comparatively fast rate, as evidenced by high expenditure elasticities for several types of goods for B40s and M40s. This suggests that the standard of living, or living styles are the dominant factor that contributes to the problems of increasing cost of living. |
