What is Input Output Analysis ?

Wassily Leontief won a Nobel Prize in Economics in 1973 for him explanation of the economy
using his input-output model. There are two application of the Leontief model:a closed model and an open model. A closed model deals only with the income of each industry whereas the open model finds the amount of production needed to satisfy an increase in demand. Example one will familiarize you with the terminology and what different vectors represent. Using the same vector names as in the example we run through the linear algebra. Then the technology matrix from 1992 will be used to analyze the interdependencies among the sectors. The most useful application of input-output analysis for the economist or a common broker is the ability to be able to see how the change in demand for one industry effects the entire economy. I will focus on showing that the same totalincrease of demand will have different effects on the Gross Domestic Product, when the demand is added to different industries.