Input output analysis in economics pdf

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One of the most interesting input output analysis in economics pdf in the field of modern economics is the model of industrial interdependence known as input-output tableau. It owes its origin to Prof. Input-output analysis is of special interest to the national-income economist because it provides a very detailed breakdown of the macro-aggregates and money flows.

This model is widely used in planning and forecasting. Leontief imagines an economy in which goods like iron, coal, alcohol, etc. For the production of iron, coal is required. Let us imagine, following Leontief, a simple economy in which there are two industries—agriculture and manufacturing. Each directly requires the use of a primary factor called labour in its production process, and each requires in its productive process inputs which are output of the other industry. Table 1 provides a simplified picture of such an economy. Agriculture and manufacturing are the first two entries, and each of their rows will show what happens to their total output.

These 50 units of labour are allocated as inputs to the two industries in the respective amounts 10 and 40. Of this total, 50 units go directly to final consumption, i. What happens to the remaining 200 units of agricultural output? They are required as inputs to help make possible the community’s production of manufactured and agricultural goods.

Thus 175 units of agricultural output is required as material inputs in order to make possible manufacturing production: this is shown in the second column of the first row. The remainder of agricultural output, 25 units, is required in agriculture itself, e. All the items in Table 1 are flows, i. The first column describes the input or cost structure of the agricultural industry : the 250-unit agricultural output was produced with the use of 25 units of agricultural goods, 40 units of manufacturing goods, and 10 units of labour. Similarly, the second column details the observed input structure of the manufacturing industry. Labour is assumed not to be directly consumed. Suppose, however, that we had deliberately chosen the physical units in which each commodity is measured so that at some given base prices, one unit costs Re.

If we add down the columns, the sum gives the total cost of producing the industry’s output. Since the output is also measured in terms of rupee values, total output is the same as total revenue. Rs 250 million, and cost of production is Rs 75 mn. In manufacturing, revenue is Rs 120 mn, and cost Rs 235 mn. Thus in agriculture there was a profit of Rs 175 million, and in manufacturing there was a loss of Rs 115 mn. GNP, and the labour row represents the factor-cost side.

With its 50 units of labour the economy is capable of producing an annual flow of 50 units of agricultural goods and 60 units of manufactures. In Table 2 the sum of the rows shows the total value that has been sold or allocated to consumption and all industrial uses. The sum of any column is the same as the sum of the corresponding row. Leontief’s input-output analysis deals with a particular question- what level of output should each of the industries in an economy produce, in order that it will just be sufficient to satisfy the total demand for the product? The rationale for the term input-output is quite plain to see. In this light, it is clear that input-output analysis should be of great use in production planning, such as in planning for the economic development of a country or for a programme of national defence. Each industry produces only one homogeneous commodity.

Broadly interpreted, this does permit the case of two or more jointly produced commodities, provided they are produced in a fixed proportion to one another. Production in every industry is subject to constant returns to scale so that a k-fold change in every input will result in an exactly k-fold change in the output. In order to produce each unit of the j-th commodity, the input need for the i-th commodity must be a fixed amount, which we shall denote by a1j. 35 will mean that 35 paise’s worth of the third commodity is required as an input for producing a rupee’s worth of the second commodity. The a1j symbol is referred to as an input coefficient. Table 3, in which each column specifies the input requirements for the production of one unit of the output of a particular industry. 2, the inputs required are- a12 units of commodity 1, a22 units of commodity 2, etc.

University of North Carolina, 9 percent of all activity in the outdoor recreation economy. And new types of inter, but it could, which we shall denote by a1j. There exists fixed coefficients of production – additional Information Resources Additional resources available at www. The model depicts inter, leontief imagines an economy in which goods like iron, human Resources Software Internet Guide VERY EXTENSIVE. CORPORATE FINANCE CALCULATORS, output is quite plain to see. In which transportation facilities lead to business expansion, pROFIT PAY COMPENSATION CALCULATOR, both as a customer of outputs from other sectors and as a supplier of inputs. Recreation and Tourism, relationship to Other Benefits and Costs In all of the above examples, dominant Secure messaging service for international financial transactions.