Standard of Livin; The country’s standard of living can be defined as the amount of goods and services available in the country Factors to consider when calculating standard of living We can never state with certainty that higher national income equates higher standard of living. There are several factors that must be taken into account when calculating standard of living. Income distribution In some countries, 20% of the population is enjoying 80% of the country's national income. The country’s national income has benefited only a handful. This wide disparity in income is clearly depicted in countries like India where the rich live in bungalows and employ several servants to serve them while the poor are struggling to make ends meet. Working hours Despite their high national income, the Japanese have to work long hours. Hence it is not necessary that higher income means higher standard of living if working, hours have been extended and working conditions have deteriorated. Negative externalities Despite an increase in national income, there is usually a price to be paid for higher growth in the form of negative extemalities. In highly industrialized nations like Germany and Taiwan, pollution and traffic congestion are part of daily life. Environmental pollution will have adverse effects on the health of the people. Hectic lifestyles The achievement of higher national incomes in countries like Taiwan and Singapore has come about due to an increase in working hours. This will be at the expense of family life and individual time. Government expenditure ‘Some governments use a portion of their income to spend on military equipment and weapons, e.g North Korea. The expenditure on such goods will definitely be carried out at a high opportunity cost in terms of consumer goods forgone. The people in such countries will not be able to enjoy a high standard of living as a result, Ostentatious spending Some Governments spend huge amount of money on ostentatious projects to flaunt their wealth and to boost their own social image and for their own benefits.Higher national income does not mean higher standard of living if the money is, not spent on building basic infrastructure for the welfare of the people. There must be enough educational facilities for every child. Basic medical care must be made available and affordable to the public. Telecommunication and transportation services must be efficient. There must be a ready supply of clean drinking water and proper sewage system. © High birth rate Rising population usually cancels out the benefits of an increase in national income. In fact, in some countries, the rate of population growth is higher than the rate of growth in national income Measurement of the standard of living The value of this year’s national income is useful measure of how well-off a country is in material terms. However inflation increases the money value of national income but does not provide us with any more goods to consume. Real national income is found by applying the equation: Real national income = Money national income x 100 Retail Price Index The standard of living refers to the amount of goods and services consumed by household in one year and is found by applying the equation: The best measure of standard of living is real per capita income. This is derived by dividing the real national income with the population of the country. It clearly reflects the ability of the people to buy goods and services in the country. Standard of living = Real national income Population Interpretation of Standard of Living ‘An increase in the standard of living may not mean a better lifestyle for the majority i (Only a small minority of wealthy people consume the extra goods. Gi) Increased output of certain goods results in more noise, congestion and pollution, Leisure time is reduced to achieve the production increase. There is an increase in the amount of stress and anxiety in society.