A Price and Productivity Index for a Nonhomogeneous Product
Abstract Price indexes for nonhomogeneous products based upon input prices of labor and materials are inadequate because they take no account of productivity changes. Under the assumption that real output is proportional to real input of materials, it can be demonstrated that both price and productivity are functions of labor and materials costs and input of labor time. Price and productivity measures emerge from a simultaneous solution. Some very simple computational equations are derived. The method developed in this paper is tested in an empirical case. Highway prices for a fifteen-year period are calculated and compared with the Bureau of Public Roads index. The test is satisfactory.