BUSINESS ADMINISTRATION AND MANAGEMENT DEGREE

MATHEMATICS FOR BUSINESS II

UNIT 1 EXERCISES

1. Through the aggregation of different sectors within the 1962’s input-output table, the following,
summed table was obtained:
Sectors Agriculture Industry Services Final Demand
Agriculture 89.6 118.9 1.3 120.9
Industry 35.8 332 36.5 466.6
Services 16.2 69.9 76.4 310.1

(a) Compute the intermediate demand, the total output, the intermediate consumption, the primary
input and the total input for each sector. Explain their meaning.
(b) Interpret element b13 .
(c) Compute the technical coefficients matrix and interpret element a13 .
(d) Write the input-output equation for this economy.

2. Let us consider a hypothetical nation, with three productive sectors and whose economy is represented
in the following sector transaction table:

Sectors 1 2 3 Intermediate demand Final demand Total output

1 0 6 3 10
2 0 3 4 10
3 5 2 8 15

(a) Complete the previous table.

(b) Write the intermediate consumption, the total input and the primary input for each sector.
Explain their meaning.
(c) Find the technical coefficients matrix.
(d) Do the elements in the main diagonal make any sense? In the positive, what is their meaning?
(e) Compute Leontief matrix.
(f) Find the final demand which could be satisfied with the following output from sectors 1, 2 and
3: 6, 5 and 7 monetary units, respectively.
(g) Set out the numerical computations needed to obtain the production of each good if the final
demand is 6 units for sector 1, 4 units for sector 2, and 5 units for sector 3.

3. In Wonderland,
 there exist 3productive sectors. Let us consider the following technical coefficients
0.3 0 0.1
 
matrix A =  0.5 0.2 0.6 .
0.1 0 0.2
 
44
 
(a) Compute the unitary price vector to obtain the unitary value added vector V =  44 .
44
(b) Can one assure that there is always a unitary price vector satisfying any positive value added
coefficients?
(c) Compute the value added coefficients obtained when the unitary prices are 20, 10 and 20 monetary
units, respectively.

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  
0.8 0 0.1
 
4. Certain economy, with three sectors, has the following technical coefficients matrix: A =  0 0.5 0.1 .
0.1 0 0

(a) Is it possible to set the unitary price of each good to satisfy any positive value added in each
sector?
(b) What should be the unitary price vector to obtain so that the unitary value added vector of each
good be 10, 100 and 20 monetary units, respectively? (you do not need to obtain such vector
here).
(c) Find the unitary value added coefficients for each good, so that their unitary prices were 15, 7
and 10 monetary units, respectively.

5. Check the producibility of the following technical coefficients matrices through Brauer-Solow and
Hawkins-Simon conditions:
       
0.2 0 0.1 0.8 0.2 0.2 0.5 0.3 0.3 0.2 0.5 0.2
       
A =  0.2 0.4 0.2 ; B =  0 0.5 0 ; C =  0.3 0.3 0.3 ; D =  0.1 0.4 0.1 .
0 0.2 0 0.3 0 0.1 0.1 0.2 0.3 0.1 0.1 0.5

Does there exist a different method to determine if the previous matrices are productive? If the answer
is affirmative, what is the method? Apply this method to matrix A.

6. Calculate the autonomous sets and fundamental products of the following technical coefficients matri-
ces. Study if they are reducible and if they are productive (interprete both results).
       
0.5 0.1 0.4 0.5 0 0.2 0.3 0.1 0 0.5 0 0
       
A =  0.3 0.2 0.2 ; B =  0.1 0.5 0.5 ; C =  0.1 0.5 0 ; D =  0.3 0.2 0.5 ;
0.1 0.6 0.1 0.1 0.1 0.2 0.1 0.3 0.4 0.4 0.6 0.1
       
0.5 0 0.4 0.5 0 0.7 0.3 0 0 0.5 0 0
       
E =  0.3 0.2 0 ; F =  0.3 0.2 0 ; G =  0 0.2 0.4 ; H =  0.3 0.2 0 ;
0.4 0.6 0.1 0.2 0.1 0.1 0 0.5 0.1 0.2 0.7 0.1
       
0.5 0 0 0 0 0.2 0.5 0.3 0.6 0 0 0
       
J =  0 0.2 0 ; K =  0.5 0.2 0.3 ; L =  0.1 0.2 0 ; M =  0.5 0.2 0.3 .
0 0 0.4 0.4 0.6 0.4 0.3 0.4 0 0.4 0.6 0.4

7. The input-output table of an economy is:

Sectors 1 2 3 Interm. Demand Final Demand Total Output

1 8 5 0 27 40
2 10 0 35
3 8 6 4 25
Interm. Consumption
Primary Input 18 19
Total Input

(a) Complete the previous table, giving your own reasons.

(b) How many units of good 3 are needed by sector 2 in order to produce its whole output? And
how many to produce only 1 unit? Give reasons to your answers.
(c) Give the technical coefficients matrix of this economy, and determine whether it is a productive
matrix. What is the economic interpretation of the obtained result?

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 (d) If total output of sectors 1, 2, and 3 are 20, 35, and 25 monetary units, respectively, what is the
final demand that can be satisfied for each sector?
(e) Indicate the numerical computations needed to obtain the unitary price vector in this economy
to obtain the unitary values added 5, 10 and 7, respectively for each sector (you do not need to
obtain such vector here).
(f) Identify the autonomous sets and fundamental products for this economy, explaining the reasons.

8. Let us consider an economy with 3 productive sectors and verifying the following conditions:

• None of its sectors uses it own production.

• Sector 2 uses 10 units of each commodity which is different from its own good.
• Its sector transaction matrix is symmetric.
• The total input of sector 2 is 50.
• The final demand of every sector is the same amount.
• The intermediate demand of sector 1 is half of the intermediate demand of sector 2.

According to the above information, please, answer the following questions:

(a) Complete the input-output table of the economy.

Sectors 1 2 3 Interm. Demand Final Demand Total Output

1
2
3
Interm. Consumption
Primary Input
Total Input

(b) If total output of sectors 1, 2, and 3 are 80, 50, and 40 monetary units, respectively, what is the
final demand that can be satisfied?
(c) Determine if the technical coefficients matrix is decomposable, explaining reasons.
(d) Give a list of the fundamental products of the economy, if there is any. Why are they fundamental?

9. Certain
 economy is considered
 to be divided into three sectors, and its technical coefficients matrix is:
0.1 0.1 0.2
 
A =  0 0.5 0.3 .
0.5 0 0.5
(a) Determine whether this matrix is productive, explaining reasons, and give an economic interpre-
tation of this result.
(b) Compute the unitary value added for each good when the unitary prices are 20, 10, and 30
monetary units, respectively.
(c) Determine, explaining reasons, if the good of sector 3 is a fundamental product and indicate if
this good is direct of indirectly related with each good of the other sectors.
(d) Take into account the previous item and deduce, explaining reasons, if the set {1, 2} is an au-
tonomous set.

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EXERCISES TO SOLVE WITH MATHEMATICA

10. Let us consider the following technical coefficients matrices, corresponding to two different economies,
with 4 sectors each:
   
0.3 0.5 0.4 0.1 0.1 0.5 0.3 0
   
 0.1 0.2 0.1 0   0.2 0 0.1 0.3 
A= ; B= .
 0.3 0.6 0 0.3   0 0.2 0.2 0.3 
0 0.4 0.2 0.3 0.4 0 0.2 0.1

In each case, answer the following questions:

(a) Compute its Leontief matrix.

(b) By using the suitable definition, determine whether the technical matrix is productive.
(c) Check whether its Leontief matrix verifies Hawkins-Simon condition? What kind of consequences
has this result?
(d) By using Brauer-Solow condition, can you deduce that the technical coefficients matrix is pro-
ductive?
(e) Find the final demand which can satisfy a production (for sectors 1, 2, 3 and 4) of 435, 175, 350
and 290 units, respectively. What kind of consequences has this result?
(f) What production (from each sector) is needed if the final demand is of 20 units for good 1, 85
units for good 2, 30 for good 3 and 95 for good 4?
(g) Give the unitary value added coefficient for each good, if their unitary prices are 2, 5, 2.5 and
3.5, respectively. Interpret this result.
(h) Compute the unitary price needed for each good, in order to obtain the following value added
coefficients: 8, 15, 7 and 21, respectively.