An ideal cost-of-living index measures:
A) The relative cost of maintaining a particular utility level.
B) The relative changes in consumer satisfaction that arise from price increases.
C) The relative price of those goods that are considered to be necessities in consumption.
D) none of the above

Question

Quizplus · Accepted Answer

An ideal cost-of-living index measures the relative cost of maintaining a particular utility level. This means that it takes into account the prices of goods and services that people typically consume to maintain a certain standard of living, such as housing, food, transportation, and healthcare. It compares the cost of these items over time to determine the rate of inflation and the changes in the cost of living that occur. Choice B is not relevant to a cost-of-living index, as it measures consumer satisfaction rather than the cost of goods. Choice C is too narrow, as it only focuses on goods deemed necessities rather than the full range of goods needed to maintain a certain standard of living.

An Ideal Cost-Of-Living Index Measures