CONCEPT OF INPUT-OUTPUT ANALYSIS

Using a device known as the input-output table generates input-output forecasts. W. Leontief developed this method and it is associated with his name. Basically an input-output table is a matrix, each area of which shows an output or sales of a particular sector of the economy. Similarly, each column indicates all the input used by a particular sector of the economy. Moreover, it shows the use of the output of each industry as inputs by other industries and for final consumption. For example, it shows how an increase in the demand for trucks will lead to an increase in the demand for steel, glass, tires, plastic and so on, and how the increase in the demand for these products will in turn lead to an increase in the demand for the inputs required to produce them (including trucks). Input output analysis tables shows the purchases by a particular sector from all the other sectors.