Suppose that three industries are interrelated so that their outputs are used as inputs by themselves, according

Question:

Suppose that three industries are interrelated so that their outputs are used as inputs by themselves, according to the 3 × 3 consumption matrix

image

where αjk is the fraction of the output of industry k consumed (purchased) by industry j. Let pj be the price charged by industry j for its total output. A problem is to find prices so that for each industry, total expenditures equal total income. Show that this leads to Ap = p, where p = [p1   p2    p3]T, and find a solution p with non negative p1, p2, p3.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: