Earnings, Prices, and Lives

Yang Shengming

Chinese Economy, 1984, vol. 17, issue 2, 31-36

Abstract: The people's money income, retail commodity prices, and the people's standard of living are intimately related. If retail prices of commodities remain unchanged, the moremoney the inhabitants earn, the higher the living standard becomes. This is a kind of positive relationship. However, if the money earned remains constant the general price level and people's living standard are negatively related. A rise in price level means a lowering of the living standard; a lowering of price level, on the other hand, means a rise in the living standard. People usually lack an overall perspective and correct understanding of these complex relationships, and they tend to have one-sided views. They may overlook the increase in earnings, which raises the living standard, and assert that the living standard is lower because prices of some commodities rose. Or they may ignore the impact of a price rise on real-income standard of living when their earnings increase and claim that their living standard has risen. These two one-sided views are now present in the real-life situation, but the first is more prevalent; it needs to be analyzed.

Date: 1984
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