The Leontief Input-Output model establishes a fundamental economic principle where total production vectors in an economy equal the sum of intermediate demands generated by inter-sectoral consumption and final external demand. This theory is formalized through the linear algebraic matrix equation $X = C X + D$, defining key terminology such as sectors, the identity matrix ($I$), the consumption (technology) matrix ($C$), and the final demand vector ($D$). Operating within the domain of economic modeling, this mechanism provides a methodological framework for analyzing production-distribution-consumption cycles by reducing complex multi-sectoral interactions to solvable systems of linear equations.
The Leontief Input-Output model establishes a fundamental economic principle where total production vectors in an economy equal the sum of intermediate demands generated by inter-sectoral consumption…