The Problem of the True Index of the Cost of Living

BY THE EXPRESSION of we mean monetary value of those consumers' goods which are in fact consumed in course of a certain period of time by an average family belonging to a given stratum of a population. Consumption of given quantities of consumers' goods defines that general state of want-satisfaction we call the of of family in question. Any of living may be reached by various combinations of quantities of consumed goods (depending on relative prices and monetary expenditures by consumer). If in course of two periods of time, general status of wantsatisfaction of family-or standard of of that familyremains constant, then we obtain index of cost of by dividing cost of living at one period of time by cost of living at other period. This index shows relative change occurring in monetary cost of those consumers' goods which are necessary for maintenance of a certain of living. Thus in computing true index of cost of living, we compare monetary cost of two different combinations of goods which are connected solely by condition that during consumption of these two combinations, general status of want-satisfaction (the of living) is same. In practice, however, usual method of computing indexes of cost of living is so-called method of aggregates. This method consists of calculating cost of a given aggregate of consumers' goods taken in amounts corresponding to average or normal consumptiona and at prices prevailing at a given time, and dividing it by