ECON301 Lecture Notes - Lecture 11: Coefficient Matrix, Invertible Matrix, Production Planning

• School: University of Waterloo
• Department: Economics
• Course: ECON301
• Professor: Corey Van De Waal

Document Summary

Recall that so far throughout the course we have discussed the perfect compliments production function. This functional form is often referred to as a fixed coefficients or fixed proportions function and was also named after professor wassily leontief as a result of his seminal work from the early 1950s. I(cid:374) its (cid:862)stati(cid:272)(cid:863) (cid:448)e(cid:396)sio(cid:374), leo(cid:374)tief(cid:859)s i(cid:374)put output3 analysis deals with the following question: The reason for the termi(cid:374)olog(cid:455)(cid:862)input output analysis(cid:863) now becomes quite clear. In turn, the output of many other industries will enter into the steel industry as inputs, a(cid:374)d (cid:272)o(cid:374)se(cid:395)ue(cid:374)tl(cid:455) the (cid:862)(cid:272)o(cid:396)(cid:396)e(cid:272)t(cid:863) levels of these other products will depend partly upon the input requirements of the steel industry. In light of this inter-i(cid:374)dust(cid:396)(cid:455) depe(cid:374)de(cid:374)(cid:272)e, a(cid:374)(cid:455) set of (cid:862)(cid:272)o(cid:396)(cid:396)e(cid:272)t(cid:863) output le(cid:448)els fo(cid:396) the (cid:374) industries must be one that is consistent with all of the input requirements in the economy (so that no bottlenecks will arise anywhere).