Wassily Leontief (1906-1999) was a Russian-born American economist who, aside from developing highly sophisticated econo

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Wassily Leontief 1906 1999 Was A Russian Born American Economist Who Aside From Developing Highly Sophisticated Econo 1 (59.55 KiB) Viewed 14 times

Wassily Leontief 1906 1999 Was A Russian Born American Economist Who Aside From Developing Highly Sophisticated Econo 2 (9.71 KiB) Viewed 14 times

Wassily Leontief (1906-1999) was a Russian-born American economist who, aside from developing highly sophisticated economic theories, enjoyed trout fishing, ballet, and fine wines. He won the 1971 Nobel Memorial Prize in Economics for his work in creating mathematical models to describe various economic phenomena. In the remainder of this lab we will look at a very simple special case of his work called a closed exchange model. There are two basic assumptions: • Everyone exclusively buys from and sells to the central pool (i.e., there is no outside supply or demand). • Everything produced is consumed. With these assumptions and some data about how the goods are consumed, we can compute exactly what price each good should have for everyone in the community to survive. To see how this works, let's suppose there's a small country town with only five residents: a farmer, a tailor, a carpenter, a coal miner, and Slacker Bob. The farmer produces food; the tailor, clothes; the carpenter, housing; the coal miner, energy; and Slacker Bob makes moonshine, half of which he drinks himself. The following table lists what fraction of each good our five residents consume: Farmer Tailor Carpenter Miner Slacker Bob Food 0.25 0.17 0.22 0.20 0.16 Clothes Housing Energy Alcohol 0.15 0.25 0.18 0.20 0.28 0.18 0.17 0.10 0.19 0.22 0.22 0.10 0.15 0.20 0.28 0.15 0.23 0.15 0.15 0.45 So for example, the carpenter consumes 22% of all food, 19% of all clothes, 22% of all housing, 22% of all energy, and 10% of all the moonshine.
The columns in this table all add up to 1. Explain why.