Suppose that an economy consists of three industries: raw materials, manufacturi

Question

Suppose that an economy consists of three industries: raw materials, manufacturing, and services. "Raw materials" include agriculture mining and so on. "Services" include retailing, advertising, and transportation. The industries are codependent in the sense that each · the raw materials sector requires $0.28 worth of raw materials, $0.18 worth of manufactured goods, and so 23 worth of the manufacturing sector requires $0.25 worth of raw materials, SO.21 worth of manufactured goods, and S0. 16 worth of requires the outputs of itself and each of the others in order to function. We have the following services in order to provide $1 worth of raw materials services in order to provide $1 worth of manufacturing, and the service sector requres SO25 worth of raw materials. $0.29 worth of manufactured goods, and $0.15 worth of services in order to provide $1 worth of services · Put this information into an input-output matrix, A

Explanation / Answer

Raw Materials = R;
Manufacturing = M;
Services = S;
All 3 industries are c-dependent;
1$ of R requries = 0.28$ of R + 0.18$ of M + 0.23$ of S
1$ of M requires= 0.25$ of R + 0.21$ of M + 0.16$ of S
1$ of S requires = 0.25$ of R + 0.29$ of M + 0.15$ of S

Representing it as an input- out put matrix we get:
( 0.28 0.18 0.23 * ( R ( 1R
  0.25 0.21 0.16 M = 1M
0.25 0.29 0.15 ) S ) 1S )

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