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Mathematics 23 - Applied Matrix Algebra

Application Review

Application: The Leontief Closed Model


1. Which of the following matrices are exchange matrices? 1 0 1 3 Column 2 contains a negative entry, and doesnt sum to 1, a) 2 1 0 3 so it is not an exchange matrix. 1 1 2 0 2 b) c) 1 d) 0 0
1 4 1 4 1 2 5 6 1 6 1 3 2 3 1 2 1 2 1 3 1 3 1 3 3 4 1 4

2 3
2 3 1 2 1 2

This works.

Column 2 contains a negative entry, and doesnt sum to 1, so it is not an exchange matrix.

1 0 This works.

2. Find a nonnegative vector p 0 satisfying (I E) = 0, for the given exchange p matrix: 1 3 2 2 2 3 0 3 0 t 1 0 8 3 3 8 3 1 3 , so p = 3 . t a) 1 0 1 I E = 1 1 4 0 1 8 3 3 4 8 1 1 1 3 1 1 3 3 0 0 0 t 3 3 4 4


1 2

1
2 3

I E = 1 I E = 1 6 5 6 1 3 5 6 1 2 1
1 2

1 2 3 1 0 0
1 2

4 1 0 3

4 t 3

b) 0 0 0 1 1 0 3 2 c) 0
1 6 5 6 1 3 1 6 1 2

0 0 1 2 0 0 3

0 , so p = 0 . 0 t
15 t 14 3 t 14

1 0 0

1 0 0 0 1 1 0 0

15 14 3 14

, so p =

Leontief Models

Math 023 - Applied Matrix Algebra

Application Review

3. Consider a simple economy of Farmers, Carpenters, and Tailors, akin to the one discussed in class and in the homework. Suppose: the Farmers consume 2 of the food, 5 ters) and 1 the clothes. 2
1 3

of the housing (produced by the carpen1 3

the Carpenters consume 2 of the food, 5 1 carpenters) and 2 the clothes. the Tailors consume and no clothes.
1 5

of the housing (produced by the

of the food,

1 3

of the housing (produced by the carpenters) 0 with at least

Find the exchange matrix E for this problem and nd a vector p one positive nonzero entry satisfying (I E) = 0. p E= F C T
2 5 2 5 1 5 1 3 1 3 1 3 1 2 1 2

and

(I E) =
3 5 2 5 1 5

1 3 2 3 1 3 1 2 1 2 1 .

F C 0 T

We take (I E) as the coecient matrix of the homogeneous system (I E) = 0, x and solve the system by using row operations:
3 5 2 5 1 5

1 1 3 2
2 3 1 3 15 t, 8

1 0 15 8

1 0 1 15 2 8 1 0 0 0
15 t 8

If x3 = t, this gives x2 = system is

and x1 =

so the solution set for the homogeneous

( 15 t, 15 t, t), t R or (15t, 15t, 8t), t R. 8 8 Thus, 15t p = 15t , t > 0 8t is a nonnegative vector with at least one positive entry satisfying (I E) = 0. p In other words, the goods produced have the relative values 15 : 15 : 8.

Leontief Models

Math 023 - Applied Matrix Algebra

Application Review

4. Consider the international trade model consisting of three countries, c1 , c2 , and c3 . Suppose that: c1 spends 1 its income on domestic goods, 1 its income on imports from c2 , and 4 2 1 its income on imports from c3 . 4 c2 spends 2 its income on imports from c1 , 1 its income on domestic goods, and 5 5 2 its income on imports from c3 . 5 1 c3 spends 1 its income on imports from c1 , 2 its income on imports from c2 , and 4 1 its income on domestic goods. 4 Find the ratio of the incomes of the three countries. We nd the exchange matrix by considering eij to be the portion of the j th countrys income that is spent on goods from the ith country: E= Then we proceed as follows: (I E) = Thus,
3 4 1 2 1 4 4 5 2 5

c1 c2 c3
1 4 1 2 1 4 2 5 1 5 2 5 1 4 1 2 1 4

c 1 c 2 c3

2 1 5 2

1 0 1 5 1 2 0 1 4 0 0 0 3
4

t 4t p = 5 t = 5t , t > 0 4 4t t is a nonnegative vector with at least one positive entry satisfying (I E) = 0, and p the incomes of the countries are in the ratio 4 : 5 : 4.

Leontief Models

Math 023 - Applied Matrix Algebra

Application Review

Application: The Leontief Open Model


1. Which of the following consumption matrices are productive? 1 1 0 2 2 0 2 3 3 0 , C is not productive. a) C = 0 2 0 Since (I C)1 = 0 3 2 2 1 1 0 2 b) C = c) C = d) C = 0
1 4 1 3 1 3

0
1 2

Since (I C)1 =
3 2 3 4 3 16

1 0
3 2 3 8

0 0 1 0 4 0 0
1 2 1 4 1 3 1 2 1 4

2 3

0 , C is productive. 1

0
1 3

Since (I C)1

0
1 3 1 6

44 24 28 = 27 42 24 , C is productive. 20 20 40 96 60 42 1 = 67 33 96 27 , C is productive. 54 84 99

0
2 3

Since (I C)1

2. Suppose that the consumption matrix for the linear production model is
1 2 1 2 1 2 1 4

C=

Find the production vector for the following demand vectors: a) d = b) d = 1 3 2 0 We have (I C)1 d = We have (I C)1 d = 6 4 4 4 6 4 4 4 1 3 2 0 = 18 16 12 8 = x.

= x.

Leontief Models

Math 023 - Applied Matrix Algebra

Application Review

3. A small town has three primary industries: a copper mine, a railroad, and an electric power plant. To produce $1 of copper, the copper mine uses $0.20 of copper, $0.10 of rail transportation, and $0.20 of electric power. To provide $1 of transportation, the railroad uses $0.10 of copper, $0.10 of rail transportation, and $0.40 of electric power. To provide $1 of electric power, the electric utility uses $0.20 of copper, $0.20 of rail transportation, and $0.30 of electric power. Suppose that during the year there is an outside demand of $1.2 million for copper, $0.8 million for rail transportation, and $1.5 million for electric power. How much should each industry produce to satisfy the demands? First, we write down the matrix as copper 0.20 C = 0.10 0.20 Then rail 0.10 0.10 0.40 elec 0.20 copper 0.20 rail 0.30 elec

1 0 0 0.20 0.10 0.20 0.80 0.10 0.20 I C = 0 1 0 0.10 0.10 0.20 = 0.10 0.90 0.20 , 0 0 1 0.20 0.30 0.30 0.20 0.40 0.70 1 0.80 0.10 0.20 1.428 0.390 0.519 = 0.10 0.90 0.20 = 0.286 1.350 0.468 0.20 0.40 0.70 0.571 0.883 1.844

so (I C)1

So the optimal production vector is 1.428 0.390 0.519 1, 200, 000 2, 805, 190 (I C)1 d = 0.286 1.350 0.468 800, 000 = 2, 124, 680 = x 0.571 0.883 1.844 1, 500, 000 4, 158, 440

4. A small economic system consists of two industries: coal and steel. Suppose that to produce $1.00 worth of coal, the coal industry uses $0.10 of coal and $0.80 of steel. Suppose also that to produce $1.00 worth of steel, the steel industry uses $0.10 of its own product and $0.20 of coal. Find the consumption matrix C for this system. For the demand vector 10, 000 coal d= 30, 000 steel solve the equation x C = d for x. That is, nd a production vector x such that x is met, without any surplus. the outside demand d

Leontief Models

Math 023 - Applied Matrix Algebra

Application Review

First, we write down the matrix as coal steel 0.1 0.2 C= 0.8 0.1 Then (I C) = and (I C)
1

coal steel

1 0 0 1

0.1 0.2 0.8 0.1

0.9 0.2 0.8 0.9

0.9 0.2 0.8 0.9

20 13

0.9 0.2 0.8 0.9

Now to nd the optimal production, we compute x = (I C)1 d =


20 13

0.9 0.2 0.8 0.9

10000 20000

20 13

13000 26000

20000 40000

Thus, we need to produce $20,000 of coal and $40,000 of steel if we want to have $10,000 of coal and $30,000 of steel left over to sell, at the end of production.

5. An industrial system has only a Fuel industry and a Machines industry. To produce $1.00 worth of fuel, the fuel industry uses $0.30 of its own product and $0.40 worth of machines. To produce $1.00 worth of machines, the machine industry consumes $0.20 of its own product, and $0.40 of fuel. Find the consumption matrix C for this system. If the external demand for fuel and machines is given by d= 50, 000 30, 000 Fuel Machines

nd a production vector x such that the outside demand d is met, without any surplus. Following the same steps as the other problems, we obtain x = (I C)1 d = 2 1 1 1.75 50000 30000 = 130000 102500

Thus, we need to produce $130,000 of fuel and $102,500 of machines if we want to have $50,000 of fuel and $30,000 of machines left over to sell, at the end of production.

Leontief Models

Math 023 - Applied Matrix Algebra

Application Review

6. A small community includes a farmer, a baker, and a grocer with the consumption matrix and external demand vector given by C= F B G
2 5 3 10 1 5 1 2

Farmer

0
1 5

1 2 3 10

Baker 0 Grocer

1000 and d = 1000 . 1000

Find the optimal production vector x for this model. 470 300 325 1 (I C)1 = 127 180 250 165 130 110 225 so then the optimal production vector is 470 300 325 1, 000 8, 622 1 (I C)1 d = 127 180 250 165 1, 000 = 4, 685 = x. 130 110 225 1, 000 3, 661 7. An remote city has an industrial system consisting of Farmers, Carpenters, and Tailors. The tailors consume $0.40 worth of the clothes and $0.20 worth of food, for every $1.00 of clothes they produce, but they do all their work by hand, so they use no tools. The farmers eat $0.40 of every $1.00 worth of food that they produce. In addition, they require $0.20 worth of tools for working the elds, and $0.20 worth of clothing. For every $1.00 worth of tools built by the carpenters, they eat $0.40 of food, use $0.20 worth of clothes, and require $0.20 of tools for further production. What is the consumption matrix for this system? How much of each good needs to be produced in order to meet an external demand of $5,000 in clothes, $2,000 in food, and $8,000 in tools1. F C T 0.40 0.40 0.20 Farmers/Food 0.20 0.20 0 Carpenters/Tools C= 0.20 0.20 0.40 Tailors/Clothes gives us 2.4 1.4 0.8 (I C)1 = 0.6 1.6 0.2 1.0 1.0 2.0 which enables us to nd the optimal production vector 2.4 1.4 0.8 2, 000 (I C)1 d = 0.6 1.6 0.2 8, 000 = 1.0 1.0 2.0 5, 000

as

20, 000 15, 000 = x. 20, 000

1The

tools are produced by the carpenters