Monday, January 4, 2010

The Leontief open Model

Example:
Consider an open economy with three industries: coal-mining operation, electricity-generating plant and an auto-manufacturing plant. To produce $1 of coal, the mining operation must purchase $0.1 of its own production, $0.30 of electricity and $0.1 worth of automobile for its transportation. To produce $1 of electricity, it takes $0.25 of coal, $0.4 of electricity and $0.15 of automobile. Finally, to produce $1 worth of automobile, the auto-manufacturing plant must purchase $0.2 of coal, $0.5 of electricity and consume $0.1 of automobile. Assume also that during a period of one week, the economy has an exterior demand of $50,000 worth of coal, $75,000 worth of electricity, and $125,000 worth of autos. Find the production level of each of the three industries in that period of one week in order to exactly satisfy both the internal and the external demands.


It's interesting to see how matrices are being implemented in industries and economy.
You can see the solution of this example on this link: http://aix1.uottawa.ca/~jkhoury/leonteif.htm


Cynthia Azar 20071375


1 comment:

  1. Dear Cynthia,

    Interesting example and very nice website!!! Good work!!

    Remember that you still have to comment on 3 other posts. ok?

    Good Luck and thanks again!

    Zeina

    ReplyDelete