A small economy has three main industries which are steel, motor vehicles and
construction. The industries are interdependent. Each unit of steel output
requires 0.2 units from steel, 0.3 units from motor vehicles and 0.4 units from
construction. A unit of motor vehicles output requires 0.2 units from steel, 0.4
units from motor vehicles and 0.2 units from construction. The final demand
is 20 million units from steel, 50 million units from motor vehicles and 30
million units from construction.
Required:
(i) The technical coefficient matrix. (2 marks)
(ii) Total output of each industry, given that the Leontief’s inverse matrix is
0.46 0.24 0.26
_1 0.43 0.60 0.41
0.192 0.30 0.24 0.42
(3 marks)
(iii) If the final demand from steel drops by 2 million units, and that from
motor vehicles increases by 10 million units, but there is no change in
the final demand from construction, what would be the change in the
total output of constructions?
(5 marks)