Cost-of-living index Definition
A cost-of-living index measures differences in the price of goods and services over time. Price indexes, such as the U.S. Consumer Price Index, are examples of these indexes. Price indexes measure the cost of purchasing a bundle of goods and services.
A cost-of-living index is a useful way to consider welfare changes caused by changes in factors exogenous to the individual household, such as inflation, and the monetary, fiscal, and trade policies of governments.