This document provides an overview of input-output analysis, which studies the interdependencies between different production sectors of an economy. It discusses key points about input-output analysis, including that it examines the production structure and output mix of sectors and how they are interrelated. The document also outlines the main steps of input-output analysis: preparing an input-output table, computing technical coefficients, obtaining equations and solving them, and exercises in substitution. An example is provided to illustrate solving a set of simultaneous equations to determine output levels in agriculture, industry and services. Issues with input-output analysis like data problems and aggregation are also mentioned. Finally, the uses of input-output analysis for forecasting, planning, and comparative growth analysis are

1. MANAGERIAL
ECONOMY
PRESENTATION

2. GROUP MEMBERS
NAME
ROLL NO.
MANOJ YADAV
40
REKHA YADAV
41
Submitted To
Prof.
Rachna

3. INPUT – OUTPUT
ANALYSIS

4. What is Input – Output Analysis?


Introduction:
“Analysis of inter – industry (or inter –
sector) flows (or deliveries) or analysis
of inter – industry relation.”
Input – output analysis may be
described as a mathematical study of
production structure of economy.

5.  Three points may be noted
input - output analysis

First, it studies the production structure or
output – mix of an economy consisting of a
number of production sectors.
 Secondly, the input – output analysis takes
into account the fact that the various
production
sectors
are
mutually
interdependent.
 Thirdly, the input – output analysis is
mathematical in character. It consists of
solving a set of simultaneous equations to
ascertain unknowns.

6.  THE METHODS OF INPUT – OUTPUT
ANALYSIS
First Step: Preparing Input – Output
Table.
 Second Step: Computing Technical
Coefficients.
 Third Step: Obtaining The Required Set
of Equations and Solving Them.
 Fourth Step: Towards an Exercise in
Substitution.


7. Second Step- Computing Technical
Coefficients:
Purchase From Agriculture to Agriculture :
1.00 / 5.00 = 0.20 Agriculture Input
Purchase From Agriculture to Industry:
2.00 / 5.00 = 0.40 Industrial Input
Purchase From Agriculture to Services:
0.20 / 5.00 = 0.04 Services Input
Purchase From Industry to Agriculture :
2.25 / 25 = 0.09 Agriculture Input
Purchase From Industry to Industry :
6.00 / 25 = 0.24 Industrial Input
Purchase From Industry to Services :
3.00 / 25 = 0.12 Services Input

8. Purchase From Services to Agriculture :
0.2 / 20 = 0.01 Agriculture Input
Purchase From Services to Industry :
1.00 / 20 = 0.05 Industrial Input
Purchase From Services to Services :
1.8 / 20 = 0.09 Services Input

9. Third Step-Obtaining the required set
of equations & Solving them
Agriculture must produce enough to
deliver to agriculture 0.20 of its total
production i.e. 0.20 A
2. Agriculture must produce enough to
deliver to Industry 0.09 of total Industrial
Production i.e. 0.09 I
3. Agriculture must produce enough to
deliver to service 0.01 of total services
Production i.e. 0.01 S
4. Besides, agriculture must deliver to
consumer Rs. 1.55 billion worth of
agricultural production. Thus we get
1.

10. A = 0.2 A+0.09 I+0.01 S+1.55
OR 0.8 A-0.09 I-0.01 S = 1.55
In the same way with the help of the
Second Row, we get
I = 0.40 A+0.24 I+0.05 S+16
OR -0.40 A+0.76 I-0.05 S=16
Finally with help of third row of the table
of technical coefficient, we get
S = 0.04 A+0.12 I+0.09 S+15
OR -0.04 A+0.12 I+0.91 S=15
Total Output A=5, I=25 & S=20.

11. Fourth Step-Exercise In Substitution:
Thus our three equations 1, 2 & 3 will look
as follows:
0.8 A-0.09 I-0.01 S=CA
-0.4 A+0.76 I+0.05 S=CI
-0.04 A-0.12 I+0.91 S=CS
We can solve this set of equation for A, I
& S & obtain:
A=1.3319CA+0.1614CI+0.0235CS
I=0.7110CA+1.4135CI+0.0855CS
S=0.1523CA+0.1935CI+1.1112CS

12. Now for any amount of CA, CI & CS, we can
immediately determine how much should be
produced in each of the sector with the help
of below example:
Suppose CA =1.55, CI =16.00 & CS =15.00
We then get, by substitution,
A=1.3319x1.55+0.1614x16+0.0235x15=5.00
I=0.7110x1.55+1.4135x16+0.0855x15=25.00
S=0.1523x1.55+0.1935x16+1.1112x15=20.0
0
We can check up these results with the
Input-Output
table
where
given
CA=1.55, CI=25.00 & CS=25.00, Agriculture is
Rs.5billion,
Industrial
Production
is
Rs.25billion & Services Production is

13.  Problem Related To The Table
The first problem relates to data. The
most important source of info. is
production statistics but there are
significant
problems
in
getting
reliable, valid & timely – like info.
increases by the square of no. of
sectors.
 Another problem is that of Aggregation.
If we take up a real economy, say, the
US for input – output analysis, we find
there are lots of diff. activities regarded


14.  Uses Of Input – Output Analysis
input – output table today is more
than record of past history & is
considered a very useful tool of
economic analysis.
 It is used for economic forecasting in
developed countries & economic
planning or programming in the
developing countries.
 Also useful for comparative analysis of
growth.
 An

15. THANK
YOU…