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.
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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 ?
Introduction of the new cost-of-living index. In early 1940, the BLS Cost of Living Division introduced the new index, titled the Cost of Living of Wage Earners and Lower-Salaried Workers in Large Cities.
If we divide money income by a cost-of-living index, the real income rises if and only if utility rises.
Manser, "Cost-of-Living Indexes and Price Indexes for U.S.
These intangibles are also important to living standards, but are difficult to capture in a cost-of-living index. This suggests a number of other stories on the quality of life in America, how it has improved or declined over the years and its implications for the society's sense of well-being.
The theory of the cost-of-living index applies directly to the measurement of consumption prices, such as the price index for the personal consumption expenditures (PCE) component of gross domestic product (GDP).
The April cost-of-living index has risen 1.3 % compared to March 2008, the High Commission for Planning monthly bulletin "Repares statistiques" revealed on Tuesday.a This rise results essentially from a 2.5% increase in foodstuffs prices, HCP said, noting that the index of non-foodstuffs also showed a slight increase of 0.2% in comparison to March.
For example, I correct conventional cost-of-living indexes for four biases as follows:
On the recommendation that the Bureau of Labor Statistics adopt production of a cost-of-living index as its objective in measuring consumer prices: "The BLS already operates within a cost-of-living framework in producing the Consumer Price Index (CPI) and will continue to do so.
Also, consider adjusting the outsourcing fee according to the cost-of-living index.
However, the CPI has not attempted to estimate the effect of the introduction of new goods, despite the recognition of their potential importance in a cost-of-living index.
A considerable professional consensus already exists for at least two actions that would almost surely bring the CPI into closer alignment with a true cost-of-living index. First, we should move away from the concept of a fixed market basket at the upper level of aggregation and move toward an aggregation formula that takes into account the tendency of consumers to alter the composition of their purchases in response to changes in relative prices.
In fact, Arrow states that "there should be a separate cost-of-living index number for each income level."(6) Whether such price indexes should really be used to adjust poverty thresholds or eligibility requirements is not addressed in our study, although adjustments using them are made for expository purposes.