Cost-of-living Index

A cost-of-living index 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 to other items as prices vary.

There are many different methodologies that have been developed to approximate cost-of-living indexes, including methods that allow for substitution among items as relative prices change.

A Konüs index is a type of cost-of-living index that uses an expenditure function such as one used in assessing expected compensating variation. The expected indirect utility is equated in both periods.