A large manufacturer purchases an identical component from three independent suppliers that differ in unit price...
A large manufacturer purchases an identical component from three independent suppliers that differ in unit price and quantity supplied. The relevant data for 2012 and 2014 are given here.
| Unit Price ($) | |||
|---|---|---|---|
| Supplier | Quantity (2012) | 2012 | 2014 |
| A | 100 | 4.95 | 5.50 |
| B | 200 | 5.60 | 5.95 |
| C | 120 | 5.50 | 6.20 |
(a)
Compute the price relatives for each of the component suppliers separately. Compare the price increases by the suppliers over the two-year period.
(b)
Compute an unweighted aggregate price index for the component part in 2014.
(c)
Compute a 2014 weighted aggregate price index for the component part. What is the interpretation of this index for the manufacturing firm?
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