Math Problem Statement

The given economy can be defined by the following system of equations with the final demand matrix (\mathbf{d}):

[ \begin{array}{ c|c c c |c } & \text{Agriculture} & \text{Manufactures} & \text{Services} & \text{Total} \ \hline \text{Agriculture} & 60 & 180 & 0 & 120 \ \text{Manufactures} & 30 & 60 & 30 & 180 \ \text{Services} & 0 & 40 & 10 & 100 \ \text{Final Demand} & 150 & 160 & 180 & \end{array} ]

First, let's form the input-output matrix (\mathbf{C}):

[ C = \begin{pmatrix} 0.30 & 0.60 & 0.00 \ 0.15 & 0.20 & 0.05 \ 0.00 & 0.27 & 0.05 \end{pmatrix} ]

Now define the vector of total outputs (\mathbf{x}) and the vector of final demands (\mathbf{d}):

[ \mathbf{x} = \begin{pmatrix} x_1 \ x_2 \ x_3 \end{pmatrix}, \quad \mathbf{d} = \begin{pmatrix} 150 \ 160 \ 180 \end{pmatrix} ]

The system of equations to solve is:

[ \mathbf{x} = \mathbf{C}\mathbf{x} + \mathbf{d} ]

This can be rewritten as:

[ (\mathbf{I} - \mathbf{C})\mathbf{x} = \mathbf{d} ]

[ \mathbf{I} - \mathbf{C} = \begin{pmatrix} 1 - 0.30 & -0.60 & 0.00 \ -0.15 & 1 - 0.20 & -0.05 \ 0.00 & -0.27 & 1 - 0.05 \end{pmatrix}

\begin{pmatrix} 0.70 & -0.60 & 0.00 \ -0.15 & 0.80 & -0.05 \ 0.00 & -0.27 & 0.95 \end{pmatrix} ]

Now solve for (\mathbf{x}):

[ \begin{pmatrix} 0.70 & -0.60 & 0.00 \ -0.15 & 0.80 & -0.05 \ 0.00 & -0.27 & 0.95 \end{pmatrix} \begin{pmatrix} x_1 \ x_2 \ x_3 \end{pmatrix}

\begin{pmatrix} 150 \ 160 \ 180 \end{pmatrix} ]

By performing Gaussian elimination or using matrix inversion for ((\mathbf{I} - \mathbf{C})^{-1}) to solve for (\mathbf{x}):

[ (\mathbf{I} - \mathbf{C})^{-1} \approx \begin{pmatrix} 1.66071 & 1.25607 & 0.06690 \ 0.16677 & 1.33915 & 0.07057 \ 0.07986 & 0.35041 & 1.03829 \end{pmatrix} ]

Now multiplying the inversed matrix with the final demand vector (\mathbf{d}):

[ \mathbf{x} = \begin{pmatrix} 1.66071 & 1.25607 & 0.06690 \ 0.16677 & 1.33915 & 0.07057 \ 0.07986 & 0.35041 & 1.03829 \end{pmatrix} \begin{pmatrix} 150 \ 160 \ 180 \end{pmatrix} ]

[ = \begin{pmatrix} 1.66071 \cdot 150 + 1.25607 \cdot 160 + 0.06690 \cdot 180 \ 0.16677 \cdot 150 + 1.33915 \cdot 160 + 0.07057 \cdot 180 \ 0.07986 \cdot 150 + 0.35041 \cdot 160 + 1.03829 \cdot 180 \end{pmatrix} ]

[ = \begin{pmatrix} 249.1075 + 200.9712 + 12.0420 \ 25.0155 + 214.2639 + 12.7038 \ 11.9790 + 56.0656 + 186.8882 \end{pmatrix} ]

[ \approx \begin{pmatrix} 396.14 \ 300.13 \ 235.75 \end{pmatrix} ]

Thus, the new output levels are approximately:

  • Agriculture: (396.14)
  • Manufactures: (300.13)
  • Services: (235.75)

Solution

Your calculations for the output levels based on the input-output matrix are detailed and generally correct. Let's summarize the results and outline the steps:

Problem Recap

You are given an economy characterized by an input-output matrix C\mathbf{C}, and you need to find the vector of total outputs x\mathbf{x} that satisfies the system:

x=Cx+d\mathbf{x} = \mathbf{C}\mathbf{x} + \mathbf{d}

This can be rewritten as:

(IC)x=d(\mathbf{I} - \mathbf{C})\mathbf{x} = \mathbf{d}

where:

  • I\mathbf{I} is the identity matrix.
  • d\mathbf{d} is the vector of final demands.
  • x\mathbf{x} is the vector of total outputs.

Calculation Steps

  1. Form the Matrix IC\mathbf{I} - \mathbf{C}:
0.70 & -0.60 & 0.00 \\ -0.15 & 0.80 & -0.05 \\ 0.00 & -0.27 & 0.95 \end{pmatrix}$$ 2. **Find the Inverse $$(\mathbf{I} - \mathbf{C})^{-1}$$:** $$(\mathbf{I} - \mathbf{C})^{-1} \approx \begin{pmatrix} 1.66071 & 1.25607 & 0.06690 \\ 0.16677 & 1.33915 & 0.07057 \\ 0.07986 & 0.35041 & 1.03829 \end{pmatrix}$$ 3. **Multiply the Inverse by the Final Demand Vector $$\mathbf{d}$$:** $$\mathbf{x} = (\mathbf{I} - \mathbf{C})^{-1} \mathbf{d}$$ Substituting the values: $$\mathbf{x} = \begin{pmatrix} 1.66071 & 1.25607 & 0.06690 \\ 0.16677 & 1.33915 & 0.07057 \\ 0.07986 & 0.35041 & 1.03829 \end{pmatrix} \begin{pmatrix} 150 \\ 160 \\ 180 \end{pmatrix}$$ 4. **Perform the Matrix Multiplication:** $$\mathbf{x} \approx \begin{pmatrix} 396.14 \\ 300.13 \\ 235.75 \end{pmatrix}$$ ### Interpretation The resulting output levels for each sector are approximately: - **Agriculture**: 396.14 - **Manufactures**: 300.13 - **Services**: 235.75 These values represent the total output necessary to satisfy both the internal inter-industry demands and the final external demand. ### Follow-up Questions: 1. How would changes in the final demand vector $$\mathbf{d}$$ affect the output levels? 2. What economic interpretation can be made from the elements of the matrix $$(\mathbf{I} - \mathbf{C})^{-1}$$? 3. How do the sectors' interdependencies influence the overall output levels? 4. What would be the effect of a change in one of the coefficients in the input-output matrix $$\mathbf{C}$$? 5. Can the method be extended to more complex economies with more sectors? ### Tip: When working with economic models like this, small changes in the coefficients of the input-output matrix or the final demand can significantly alter the results. Sensitivity analysis can be useful to understand the robustness of the solution.

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Math Problem Analysis

Mathematical Concepts

Linear Algebra
Matrix Operations
Gaussian Elimination

Formulas

Matrix multiplication
Matrix inversion

Theorems

Properties of Inverse Matrices

Suitable Grade Level

Advanced College