This document provides an overview of input-output analysis. It was first developed by Quesnay and later modernized by Wassily Leontief in 1941. Input-output analysis examines the interdependencies between industries and how each industry uses the outputs of other industries as inputs for its own production. It models these inter-industry relationships using technical coefficients to study the structure of an economy and aid in areas like national income estimation, production trends, and impact of economic crises. However, the model relies on simplifying assumptions like single products per industry and no factor substitution that limit its realism.

1. Input-output
analysis
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II SEM MA ECONOMICS

2. Outline
 Input-output analysis
 Definition
 Features
 Assumptions
 Importance
 Technical coefficent
 shortcomings

3.  First developed by Quseney in his work
“Tableau Economique.”
 Modern times-W W Leontief in 1941,
“Structure of an American Economy.”
 Based on the concept National Income
Balances.
 Interrelationship and interdependence
between various industries.

4. “How an industry undertakes the
production by using the output of
other industries in the economy
and how the output of the given
industry is used up in other
industries.”

5. Wassily Leontief
(1905-1999)
Nobel prize(1973)
 “The Structure of the American
Economy.”(1941)
 “Input-Output Economics”(1996)

6. DEFINITION
 Simon Kuznet , “in the essence it is
an attempt to study the structure of
an economy.”
 J R Hicks, “An input is something
which is bought for enterprise
while an output something which is
sold by it.”

7. FEATURES
 Production
 General equilibrium
 Statistical relationship
 Empirical fact
 Close or open, static or dynamic,
aggregative or disaggregate.
 Prediction

8. Assumptions
Homogeneous product
Constant returns to scale
Transactions in terms of money
No joint product
Purely competitive firms
No change in taste, factor suppliers

9. Technical coefficent
 A number of units of any industry’s
output needed to produce one unit
of another industry's output.
 Obtained by dividing industry’s
inputs by it’s total output.
aij = xij/xj

10. IMPORTANCE
 Repercussion of economic crisis
 Production trends of different
sectors
 National income estimation
 Useful to producer
 measurement of regional
development
 Mobilization plans

11. Shortcomings
 Each sector produce one product.
 Does not employ labour only.
 Over simplified and unrealistic
assumption.
 Factor substitution
 Neglect time lags.
 Emphasize on production side.
 Not dealt with disequilibrium.