Math Problem Statement

Find the gross output of goods needed to satisfy a consumer demand for 190 million dollars worth of agricultural products, 120 million dollars worth of manufactured products, and 170 million dollars worth of services. Use a solver to compute the inverse matrix based on the consumption matrix.

Solution

The problem you're facing involves finding the gross output required to satisfy certain demands in a simple economy consisting of three industries: agriculture, manufacturing, and services. The problem provides a consumption matrix and demands for each sector.

The consumption matrix CC is given as:

0.1 & 0.2 & 0.2 \\ 0.1 & 0.2 & 0.1 \\ 0.1 & 0.1 & 0.2 \end{pmatrix}$$ The demand vector $$D$$ for the three industries (agriculture, manufacturing, and services) is: $$D = \begin{pmatrix} 190 \\ 120 \\ 170 \end{pmatrix}$$ ### Steps to solve the problem: 1. **Form the identity matrix** $$I$$, which is: $$I = \begin{pmatrix} 1 & 0 & 0 \\ 0 & 1 & 0 \\ 0 & 0 & 1 \end{pmatrix}$$ 2. **Construct the matrix $$A$$** where $$A = I - C$$. This matrix accounts for how much each sector needs to produce on its own, minus internal consumption. 3. **Find the inverse** of the matrix $$A$$, i.e., $$A^{-1}$$. 4. **Multiply** the inverse of $$A$$ by the demand vector $$D$$ to find the total output $$X$$, using the equation: $$X = A^{-1} \cdot D$$ Where $$X$$ will give you the gross output required for each sector. ### Let's compute this step by step. I'll compute this for you using Python to find the inverse of the matrix and multiply it by the demand vector.The gross output required to satisfy the consumer demand is approximately: - **323.73 million dollars** worth of agricultural products, - **225.61 million dollars** worth of manufactured products, and - **281.17 million dollars** worth of services. Would you like a detailed explanation of any step? Here are five related questions to deepen your understanding: 1. How is the consumption matrix used to model interdependencies between industries? 2. Why do we subtract the consumption matrix from the identity matrix in this method? 3. What role does the inverse matrix play in calculating the required outputs? 4. How would changing one sector's demand affect the overall output calculation? 5. Can this method be extended to more than three industries? **Tip:** In linear economic models, the inverse matrix helps account for the chain reaction of production needs due to inter-industry dependencies.

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Math Problem Analysis

Mathematical Concepts

Matrix Algebra
Inverse Matrix
Economics Input-Output Model

Formulas

X = A^-1 * D
A = I - C

Theorems

Inverse of a Matrix Theorem
Input-Output Economic Model

Suitable Grade Level

College Level (Linear Algebra or Economics)