The Cost of Living

Cost of living is made up of the rate of inflation or deflation, Consumer price index, and the region of the country you live in. It is not made up of consumption, or taxes, although taxes can come into effect, it usually isn't a large part of the cost of living. The reason why it cost more to live in New York City, than it does some small town in Iowa is supply and demand. There are only so many place to live, and jobs usually pay better as well.

A lot of things go into the cost of living. supply and demand, the market mechanism (http://kr.mnsu.edu/~renner/supdem.htm), electricity, water, and oil costs (which we have little control over), the housing market, interest rates, inflation. Prices don't follow salaries, no... prices are basically the basic value plus the maximum amount that people would be willing to pay for them (profit to the company) while having a price competitive enough to have some advantage over their competitors. So essentially if enough people refused to buy health care because prices were too high, health care providers would be forced to lower their prices.