A national economy has four products agricultural machinery

A national economy has four products: agricultural, machinery, fuel and steel. Producing 1 unit of agricultural products requires .2 units of agricultural products, .3 units of machinery, .2 units of fuel, and .1 unit of steel. Producing 1 unit of machinery requires .1 units of agricultural, .2 units of machinery, .2 units of fuel, and .4 units of steel. Producing 1 unit of fuel requires .1 unit of agricultral, .2 units of machinery, .3 unit of fuel, and .2 unit of steel. Producing 1 unit of steel requires .1 agricultural unit, .2 units of machinery, .3 units of fuel, and .2 unit of steel.

Using Leontief Input-Output Model....

1) What is the matrix for this economy?

2) How many units of each product will yield a surplus of 1700 agricultural units, 1900 machinery units, 900 fuel units, and 300 steel units? (The gross production vector)

3) The minister of finance for this economy wants to double the steel surplus in order to earn more export money. If the steel surplus is doubled, what will be the effect on the gross production?

Solution

3) over all producing evrything is consuming th the 0.8 units in total

leaving the machinery which required o,9 units in total.

if we double the prodction of the steel then total 1.6 unit will be required, to double the production

as 0.6 units of fuel will be cosumed alone, which can be used in the production of agriculture and machinery,

assuming that we have limited supplu of raw material then doubling the fuel production will mean reducing the other production by half.