An economy produces only two commodities X and Y. The two commodities serve as intermediate input in each other’s production. To produce a unit of X, 0.2 unit of X and 0.6 unit of Y are needed. Similarly, to produce a unit of Y, 0.4 unit of X and 0.3 unit of Y are needed. 30 and 50 labour hours are required to produce a unit of X and a unit of Y respectively. The wage rate is Rs. 20 per labour hour. If the final demand of X increases by 1500 units and that of Y decreases by 1200 units, find: (i) Change in the gross output of each of the two commodities. (ii) Change in the labour requirement. (iii) Change in the value added in two producing sectors.
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Wassily Leontief was an economist who was one of the first people to do com-
putational analysis of economics. Moreover his work involved one of the first
uses of a computer to produce this analysis, done in 1949 at Harvard. For his
work he won a Nobel Prize in 1973.
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