Look at interrelationships between industries in a given economy. A sector of the economy will use...
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Transcript of Look at interrelationships between industries in a given economy. A sector of the economy will use...
Look at interrelationships between industries in a given economy.
A sector of the economy will use resources from itself and other sectors in its production run.
Leontief Input–Output Model
Open model: production uses some commodities, the rest not used are considered surplus.
Closed model: production uses 100%, all inputs/outputs are part of the economy, no surplus
Two models
X
DAXX
Gross production, a column vector
A Technology (or consumption) matrix,
describes relationship between inputs/outputs
D Surplus, another column vector
Open Model
0 AXX
Closed Model
Example 1
45.3.
2.2.A
Given an economy made of Agriculture and Manufacturing.
Technology matrix describes inputs (rows) needed for outputs (columns).
DAXX
1 unit of Agr. requires units of Agr. and units of Man.
1 unit of Man. requires units of Agr. and units of Man.
If 100 units of each is produced, what is left in surplus?
units of Agriculture and
units of Manufacturing are left in surplus.
Example 1 – cont. DXAI )(
45.3.
2.2.A If a surplus of 80 Agr. units and 540 Man.
units is desired, what should be produced?
Produce units of Agr. and units of Man.
Example 2
5.6.2.
2.3.4.
3.1.4.
A
Given a closed economy, find the budgets(outputs) for government, industry and households.
Here the first column represents:
1 unit of Gov. requires units of Gov., units of Ind. and units of House.
3
2
1
x
x
x
X
0)( XAI
0)( XAI
0
0
0
_________
_________
_________
Example 2 – continued
0
0
0
000
19/1210
38/2301