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................................... 150.................. 5.45............. 6.00
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?