(a) Distinguish between input-output analysis and Markov analysis. (2
marks)
(b) A miniature economy has three industries: motor vehicle, electricity and steel.
These industries are interdependent., such that, the output of one industry is
the input of another. The following table shows the input ratios of each
industry.
Output Input
Motor
vehicles
Electricity Steel
Motor
vehicles
0.17 0.25 0.25
Electricity 0.25 0.25 0.33
Steel 0.50 0.33 0.33
The Leontif inverse matrix is computed as below:

3.08 1.98 2.15
(I – A)1
2.64 3.41 2.70
3.96 3.19 4.46
Required:
(i) Define the term “input ratio.” (2 marks)
(ii) Interpret the input column and output row for motor vehicles using the
input ratios table. (2 marks)
(iii) Determine the primary inputs required by each industry, if the final
demand is Sh. 216 million, Sh. 240 million and Sh. 360 million for motor
vehicles, electricity and steel industries respectively.
(6 marks)
(iv) The assumptions made in making the analysis above. (2 marks)