Overview
On this page, we discuss the economic models introduced by Nobel laureate Wassily Leontief (1906-1999).
Important
The basic and advanced learning objectives listed below are meant to give you an idea of the material you should learn about this section. These are mainly intended to be used in a course which uses an Active Learning approach, where students are required to “read ahead” before each class - but can equally be used in a more traditional course setting.
Unless your teacher gives you specific instructions, it is up to you to decide how much of the listed resources you need to read or watch - you probably do not need to go through all of it. You might also want to look at the General Study Tips & Tricks page for some recommendations on how to effectively study with a math textbook and videos.
Basic learning objectives
These are the tasks you should be able to perform with reasonable fluency when you arrive at your next class meeting. Important new vocabulary words are indicated in italics.
- Write down the consumption matrix (also called input-output matrix) of a given economy.
- Write down the matrix equation describing the necessary production levels (in form of the production vector \(\vec{x}\)) which would balance the given (closed or open) economy.
Advanced learning objectives
In addition to mastering the basic objectives, here are the tasks you should be able to perform after class, with practice:
- Solve the appropriate equation for the given closed or open economy to find the necessary production levels of all sectors.
To prepare for class
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Watch this video which explains an example of a model for a closed economy (with no external demand, i.e. no consumer sector):
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Watch this video which gives an example of an open economy (with external demand, i.e. with a consumer sector) - note that she uses a computer algebra system find the inverse and solve the system, but it is usually best to use Gauss-Jordan instead:
