Cost of Living Index
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Cost of Living Index
The Cost of Living Index (pronunciation: /kɒst ɒv ˈlɪvɪŋ ˈɪndɛks/) is a theoretical price index that measures relative cost of living over time or regions. It is an index that measures differences in the price of goods and services, and allows for substitutions with other items as prices vary.
Etymology
The term "Cost of Living Index" is derived from the cost of living, which refers to the amount of money an individual needs to maintain a certain standard of living, and index, a statistical measure of changes in a representative group of individual data points.
Related Terms
- Consumer Price Index (CPI): An index that measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
- Inflation: The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
- Purchasing Power Parity (PPP): An economic theory that compares different countries' currencies through a "basket of goods" approach.
- Standard of Living: The level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class or a certain geographic area.
See Also
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