ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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2. Opening the model In Session 2 you explored a simple Closed Leontief Exchange Model with five in- terdependent industries. In the closed exchange model no goods or services enter or leave a national economy. However, most nations import and export goods. For this problem you will develop an open exchange model for the newly formed nation, NationLand, then generalize the model to an economy with n sectors. (a) Suppose NationLand has 5 sectors: agriculture (A), energy (N), real estate (R), education (E), and entertainment (T). The following table represents the number of units of goods from other sectors used to produce one unit with a given sector. The table also lists the demand for each good from NationLand's trading partners. Internal and External Unit Demand Levels Internal Consumption Rates A N R E 0.1 0.05 0.025 0.15 T 0.05 Agriculture (A) Energy (N) Real Estate (R) 0.01 0.02 0.0 1 0.01 0.025 0.4 0.3 0.1 0.1 0.25 Education (E) 0.1 0.05 0.125 0.2 0.15 Entertainment (T) 0.01 0.05 0.15 0.25 0.05 Outside Demand (total) 40 10 0 15 25 Let A, N, R, E, and IT denote the number of units produced by the agri- culture (A), energy (N), real estate (R), education (E), and entertainment (T) sectors respectively. Write a system of equations that defines the number of units each sector should produce to satisfy both internal and external demand (total units). (b) Rewrite your system of equations in the form M = d where M is a matrix of coefficients. What do and d represent in this model? (c) Does the system have a solution? In other words, is there a set of production levels that would satisfy both internal and external demand? Is this solution unique?
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Transcribed Image Text:2. Opening the model In Session 2 you explored a simple Closed Leontief Exchange Model with five in- terdependent industries. In the closed exchange model no goods or services enter or leave a national economy. However, most nations import and export goods. For this problem you will develop an open exchange model for the newly formed nation, NationLand, then generalize the model to an economy with n sectors. (a) Suppose NationLand has 5 sectors: agriculture (A), energy (N), real estate (R), education (E), and entertainment (T). The following table represents the number of units of goods from other sectors used to produce one unit with a given sector. The table also lists the demand for each good from NationLand's trading partners. Internal and External Unit Demand Levels Internal Consumption Rates A N R E 0.1 0.05 0.025 0.15 T 0.05 Agriculture (A) Energy (N) Real Estate (R) 0.01 0.02 0.0 1 0.01 0.025 0.4 0.3 0.1 0.1 0.25 Education (E) 0.1 0.05 0.125 0.2 0.15 Entertainment (T) 0.01 0.05 0.15 0.25 0.05 Outside Demand (total) 40 10 0 15 25 Let A, N, R, E, and IT denote the number of units produced by the agri- culture (A), energy (N), real estate (R), education (E), and entertainment (T) sectors respectively. Write a system of equations that defines the number of units each sector should produce to satisfy both internal and external demand (total units). (b) Rewrite your system of equations in the form M = d where M is a matrix of coefficients. What do and d represent in this model? (c) Does the system have a solution? In other words, is there a set of production levels that would satisfy both internal and external demand? Is this solution unique?
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