Economic Definition of cost of living. Defined.
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Term cost of living Definition: The amount of income or money needed to acquire a given quantity of goods and services or to achieve a given living standard. This cost of living notion is closely intertwined with inflation, the economy's price level, and the concept of purchasing power. The cost of living is typically indicated by a price index such as the Consumer Price Index (CPI). The CPI, for example, measures the changing cost of a specific market basket of goods. An increase in the CPI indicates that the cost of this market basket has increased, and presumably so too has the cost of living. In fact, labor union wages, benefits paid to Social Security recipients, and similar income sources are regularly adjusted for changes in the cost of living using the CPI.