(a) You are given the following transaction matrix for a two sector economy.
| Sector | Sales 1 | Sales 2 | Final demand | Gross output |
|---|---|---|---|---|
| 1 | 4 | 3 | 13 | 20 |
| 2 | 5 | 4 | 3 | 12 |
- Write the technology matrix.
- Determine the output when the final demand for the output sector 1 alone increases to 23 units. OR
(b) The demand for a quantity A is . Find the partial elasticities and when .
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Part (a) — Input–output (Leontief) analysis
Step 1 — form the technology matrix using (each input divided by the consuming sector's gross output ):
(Check: reproduces the original outputs, e.g. sector 1: ✓.)
Step 2 — set up with new demand .
Step 3 — solve . Writing the equations and clearing fractions:
Eliminating : and ; adding,
Then
Part (a) result: to meet a final demand of (sector 1) and (sector 2), gross outputs are units and units.
Part (b) — Partial elasticities of demand
Given: .
Step 1 — partial derivatives.
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