Cost of living index numbers generally represent the average change in prices over a period of time, paid by a consumer for a fixed set of goods and services. It measure the relative changes over time in the cost level require to maintain similar standard of living.
Items contributing to consumer price index are generally:
• Food
• Clothing
• Fuel and Lighting
• Housing
• Miscellaneous.
Uses of Cost of Living Index:
1. CLI numbers are used for adjustment of dearness allowance to maintain the same standard of living.
2. It is used in fixing various economic policies.
3. Its helps in measuring purchasing power of money.
4. Real wages can be obtained with the help of CLI numbers.