Question

You are given the following transaction matrix for a two-sector economy.

Sector	Sales		Final demand	Gross output
	1	2
1	4	3	13	20
2	5	4	3	12

(i) Write the technology matrix? 

(ii) Determine the output when the final demand for the output sector 1 alone increases to 23 units.

Answer 1

The technology matrix is B 

The main diagonal elements are positive and |I – B| is positive. Therefore the system is viable.

X = (I – B)^-1D, where

The output of sector 1 should be 34.16 and sector 2 should be 17.31.