An economy has four sectors: Agriculture, Manufacturing, Services, and Transportation. Agriculture sells 20% of its output to Manufacturing, 30% to Services, 30% to Transportation, and retains the rest. Manufacturing sells 35% of its output to Agriculture, 35% to Services, 20% to Transportation, and retains the rest. Services sells 10% of its output to Agriculture, 20% to Manufacturing, 20% to Transportation, and retains the rest. Transportation sells 20% of its output to Agriculture, 30% to Manufacturing, 20% to Services, and retains the rest.
a. Construct the exchange table for this economy.
b. [M] Find a set of equilibrium prices for the economy if the value of Transportation is $10.00 per unit.
c. The Services sector launches a successful "eat farm fresh" campaign, and increases its share of the output from the Agricultural sector to 40%, whereas the share of Agricultural production going to Manufacturing falls to 10%. Construct the exchange table for this new economy.
d. [M] Find a set of equilibrium prices for this new economy if the value of Transportation is still $10.00 per unit. What effect has the "eat farm fresh" campaign had on the equilibrium prices for the sectors in this economy?