cost of living

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cost of living,

amount of money needed to buy the goods and services necessary to maintain a specified standard of livingstandard of living,
level of consumption that an individual, group, or nation has achieved. The evaluation of a standard of living is relative, depending upon the judgment of the observer as to what constitutes a high or a low scale.
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. The cost of living is closely tied to rates of inflationinflation,
in economics, persistent and relatively large increase in the general price level of goods and services. Its opposite is deflation, a process of generally declining prices. The U.S.
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 and deflation. In estimating such costs, food, clothing, rent, fuel, lighting, and furnishings as well as expenses for communication, education, recreation, transportation, and medical services are generally included. The Consumer Price Index (CPI), a measurement of the cost of living prepared by the U.S. Bureau of Labor Statistics, tracks changes in retail prices of an average "market basket." Changes are compared to prices in a previously selected base year, from which figures the percentage increase or decrease in the cost of living can be calculated. In addition to changes over time, such analyses must also consider regional variations in the cost of living, and the relative weighting of the components of the index must be reappraised periodically. The CPI is based the spending habits of 14,000 households that are considered representative of the U.S. urban and metropolitan population; data collectors collect and compile some 80,000 price quotes monthly. The first attempt to gather data on the cost of living in the United States was made by the Bureau of Labor Statistics in 1890. The dramatic increase in the rate of inflation during the 1970s led to the widespread use of cost-of-living adjustments (COLA) in wage agreements, real estate leases, and such government benefits as social security. These adjustments are often made using the CPI.

Bibliography

See bibliography under standard of livingstandard of living,
level of consumption that an individual, group, or nation has achieved. The evaluation of a standard of living is relative, depending upon the judgment of the observer as to what constitutes a high or a low scale.
..... Click the link for more information.
.

cost of living

1. 
a. the basic cost of the food, clothing, shelter, and fuel necessary to maintain life, esp at a standard regarded as basic or minimal
b. (as modifier): the cost-of-living index
2. the average expenditure of a person or family in a given period
References in periodicals archive ?
As Stapleford explains, however, "these restrictions had gender and racial consequences that undercut other efforts by the New Deal staff to make the survey and the cost-of-living index more inclusive.
The Fisher Ideal index, however, allows for changing expenditure patterns in a manner that allows it to approximate a cost-of-living index especially well and is thus known as a superlative index (Diewert 1987).
If they do not, changes in income level and its distribution can drive a wedge between the true cost-of-living index and the Tornqvist index.
These intangibles are also important to living standards, but are difficult to capture in a cost-of-living index.
Cost-of-living index number theory proceeds from the proposition that a consumption price index should measure the change in the cost of maintaining a fixed, or constant, standard of living.
Estimating this virtual price requires estimation of a demand function, which in turn provides the expenditure function, which allows exact calculation of the cost-of-living index.
We also calculate Fisher indexes, which are theoretically closer to a true cost-of-living index and which employ more recent information on expenditures.
The group's quarterly cost-of-living index, released Thursday, concludes that life in Los Angeles is a bargain.
One source of concern continues to be substitution bias, which arises from the use of a fixedweight Laspeyres index formula rather than a true cost-of-living index.
Lott declared that President Clinton lacked the courage and leadership to deal with one of the principal issues, saving billions of dollars by recalculating the cost-of-living index in a way that would reduce inflationary increases for Social Security and other benefit programs.
A true cost-of-living index, the commission's report said, should adjust for the changes in what people buy and where.
Therefore, the price of beef should be reduced to the current price of chicken, thus ratcheting down the cost-of-living index and the CPI.