Consider a simple economy consisting of three sectors: food, clothing, and shelt
ID: 1219251 • Letter: C
Question
Consider a simple economy consisting of three sectors: food, clothing, and shelter. The production of 1 unit of food requires the consumption of .4 unit of food, .2 unit of clothing, and .2 unit of shelter. The production of 1 unit of clothing requires the consumption of .1 unit of food, .2 unit of clothing, and .3 unit of shelter. The production of 1 unit of shelter requires the consumption of .3 unit of food, .1 unit of clothing, and .1 unit of shelter. Find the level of production for each sector to satisfy the demand for $100 million worth of food, $30 million worth of clothing, and $250 million worth of shelter.
Explanation / Answer
To find the level of production to satisfy demand for $ 100 million of food
1 unit of food requires 0.4 units of food
100 milion units of food requires 100 X 0.4 = 40 million units of food
100 million units of food requires 100 X 0.2 = 20 millon units of clothing
100 million units of food requires 100 X 0.2 = 20 million units of shelter
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$ 30 million worth of clothing requires 30 X 0.1 = 3 million units of food
$ 30 million worth of clothing requires 30 X 0.2 = 6 million units of clothing
$ 30 million worth of clothing requires 30 X 0.3 = 9 million units of shelter
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$ 250 million worth of shelter requires 250 X 0.3 = $ 75 million worth of food
$ 250 million worth of shelter requires 250 X0.1 = $ 25 million worth of clothing
$250 million worth of shelter requires 250 X 0.1 = $ 25 million worth of shelter
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