The ideal cost-of-living index represents:
A) the cost of attaining a given level of utility at current prices.
B) the cost of attaining a given level of utility at constant prices relative to the cost of attaining the same utility at current prices.
C) the cost of attaining a given level of utility at current prices relative to the cost of attaining the same utility at base-year prices.
D) a cost of living index that leaves everyone better off.

Question

Quizplus · Accepted Answer

The ideal cost-of-living index should measure the cost of attaining a given level of utility at current prices relative to the cost of attaining the same utility at base-year prices. This allows for the comparison of prices over time and adjusts for inflation. Option A is not ideal as it does not take into account changes in prices over time. Option B is also not ideal as it assumes constant prices, which is unrealistic. Option D is not realistic as cost-of-living indexes cannot guarantee that everyone will be better off.

The Ideal Cost-Of-Living Index Represents