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Unformatted text preview: 4-7 Leontief Input-Output AnalysisTWO-INDUSTRYMODEL2 industries: electric company E and water company WE has electricity(e.) as outputW has water(w.) as outputE and W both use both water and electricityas inputinternal demands: $1 worth of e. uses $.30 of e. and $.10 of w.$1 worth of w. uses $.20 of e. and $.40 of w.external demands: $12 million of e.$8 million of w.Question: how much w. and e. must W and E produce to satisfy internal and external demands?4-7p. 1EW10 w. / $e.20 e. / $w.30 e. / $e.40 w. / $w.Outsidedemand$12M e.$8M w.Answer: We need to write some equations.Let: x1 = total output ($s worth) of e. needed from Ex2= total output ($s worth) of w. needed from WInternal demands (in $s worth):for e.: (used by e.) + (used by w.) = .3x1+ .2x2for w. (used by e.) + (used by w.) = .1x1+ .4x2So:x1= 12,000,000 + .3x1+ .2x2(electricity equation)x2= 8,000,000 + .1x1+ .4x2(water equation)These equations define the problem. Solve for x1and x2....
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- Spring '11