Suppose an economy has four sectors: Mining, Lumber, Energy, and Transportation.

Question

Suppose an economy has four sectors: Mining, Lumber, Energy, and Transportation. Mining sells 20% of its output to Lumber, 70% to Energy, and retains the rest. Lumber sells 10% of its output to Mining, 40% to Energy, 15% to Transportation, and retains the rest. Energy sells 20% of its output to Mining, 15% to Lumber, 20% to Transportation, and retains the rest. Transportation sells 10% of its output to Mining, 20% to Lumber, 60% to Energy, and retains the rest. Construct the exchange table for this economy. Find a set of equilibrium prices for this economy. Complete the exchange table below

Explanation / Answer

Here we have given using column four that the total output of transport, given to different economies is :

0.1+0.2+0.6+0.1 =1.0

And further this 1 unit is represented by $ 100 as PL is given $100.

Similarly we find that the sum of all outputs of Energy is 0.20+0.15+0.45+0.20 = 1

and 1 unit is represented now by $100, so we also have that PE= $100

Similarly we have that the sum of all outputs of Lumber is 0.10+0.35+0.40+0.15 = 1

and 1 unit is represented now by $100, so we also have that PL= $100

Similarly we have that the sum of all outputs of Mining is 0.10+0.20+0.70 = 1

and 1 unit is represented now by $100, so we also have that PM= $100

Answer

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