
2.7 LEONTIEF INPUT–OUTPUT MODEL 147
1. A
N
I
NPUT
–O
UTPUT
M
ATRIX FOR A
T
HREE
-S
ECTOR
E
CONOMY
A simple economy consists of three sectors: agriculture
(A), manufacturing (M), and transportation (T). The input–
output matrix for this economy is given by
AMT
A
M
T
a. Determine the amount of agricultural products con-
sumed in the production of $100 million worth of man-
ufactured goods.
b. Determine the dollar amount of manufactured goods
required to produce $200 million worth of all goods in
the economy.
c. Which sector consumes the greatest amount of agricul-
tural products in the production of a unit of goods in that
sector? The least?
2. A
N
I
NPUT
–O
UTPUT
M
ATRIX FOR A
F
OUR
-S
ECTOR
E
CONOMY
The relationship governing the intraindustrial and inter-
industrial sales and purchases of four basic industries—
agriculture (A), manufacturing (M), transportation (T), and
energy (E)—of a certain economy is given by the follow-
ing input–output matrix.
AMT E
A
M
T
E
a. How many units of energy are required to produce 1
unit of manufactured goods?
b. How many units of energy are required to produce 3
units of all goods in the economy?
c. Which sector of the economy is least dependent on the
cost of energy?
d. Which sector of the economy has the smallest intrain-
dustry purchases (sales)?
In Exercises 3–6, use the input–output matrix A and the
consumer demand matrix D to solve the matrix equation
(I ⴚ A)X ⴝ D for the total output matrix X.
3.
4.
5.
6.
A c
0.6 0.2
0.1 0.4
d and D c
8
12
d
A c
0.5 0.2
0.2 0.5
d and D c
10
20
d
A c
0.2 0.3
0.5 0.2
d and D c
4
8
d
A c
0.4 0.2
0.3 0.1
d and D c
10
12
d
≥
0.3 0.2 0 0.1
0.2 0.3 0.2 0.1
0.2 0.2 0.1 0.3
0.1 0.2 0.3 0.2
¥
£
0.4 0.1 0.1
0.1 0.4 0.3
0.2 0.2 0.2
§
7. Let
Show that
8. A
N
I
NPUT
–O
UTPUT
M
ODEL FOR A
T
WO
-S
ECTOR
E
CONOMY
A simple economy consists of two industries: agriculture
and manufacturing. The production of 1 unit of agricultural
products requires the consumption of 0.2 unit of agricul-
tural products and 0.3 unit of manufactured goods. The
production of 1 unit of manufactured goods requires the
consumption of 0.4 unit of agricultural products and
0.3 unit of manufactured goods.
a. Find the total output of goods needed to satisfy a
consumer demand for $100 million worth of agricul-
tural products and $150 million worth of manufactured
goods.
b. Find the value of the goods consumed in the internal
process of production in order to meet the gross output.
9. Rework Exercise 8 if the consumer demand for the output
of agricultural products and the consumer demand for
manufactured goods are $120 million and $140 million,
respectively.
10. Refer to Example 3. Suppose the demand for raw rubber
increases by 10%, the demand for tires increases by 20%,
and the demand for other rubber-based products decreases
by 10%. Find the level of production for each subsidiary in
order to meet this demand.
11. A
N
I
NPUT
–O
UTPUT
M
ODEL FOR A
T
HREE
-S
ECTOR
E
CONOMY
Consider the economy of Exercise 1, consisting of three
sectors: agriculture (A), manufacturing (M), and trans-
portation (T), with an input–output matrix given by
AMT
A
M
T
a. Find the total output of goods needed to satisfy a con-
sumer demand for $200 million worth of agricultural
products, $100 million worth of manufactured goods,
and $60 million worth of transportation.
b. Find the value of goods and transportation consumed in
the internal process of production in order to meet this
total output.
£
0.4 0.1 0.1
0.1 0.4 0.3
0.2 0.2 0.2
§
1I A 2
1
£
1.13 0.69 0.37
0.05 1.05 0.03
0.02 0.02 1.07
§
A £
0.08 0.60 0.30
0.04 0.02 0.01
0.02 0 0.06
§
2.7 Exercises
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