Cost-of-Living Dynamics Flashcards

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What does “cost of living” mean?

It is the money a household needs to pay for basic goods and services, like food, housing, transport and energy.

A general rise in prices over time. It means you need more money to buy the same things.

CPIH measures inflation like CPI, but it also includes housing costs for people who own their homes.

The average change in prices of a basket of goods and services that UK households buy. It is the main measure of inflation.

A sample of common items and services that people buy. It is updated each year and each item has a weight.

Because people spend more on some things than others. Heavier weights change CPI by more.

Income adjusted for inflation. It shows what your pay can actually buy.

Subtract inflation from pay growth. Example: pay up 4% and prices up 6% means real pay down 2%.

Higher energy and food prices, and a weaker pound that makes imports more expensive.

They spend a larger share of their income on essentials like food, rent and energy, so increases hit them harder.

The amount of goods and services your money can buy. Inflation reduces purchasing power.

A time when prices, especially for essentials, rise faster than incomes, so many households struggle to afford basics.