I am watching this video about the Leontief input-output model: https://youtu.be/hlaBURtSDO8?t=12m26s

One thing I don't understand is: why not use $Ap - p$ instead of $p - Ap$? It seems to make better sense to measure net production by output - input. Maybe I am missing something?

  • 1
    $\begingroup$ Please include all the relevant information in the body of the question so we don't have to watch the video. This way the question stays even after the video is moved and the link dies. $\endgroup$
    – Giskard
    Aug 14 '16 at 11:53

$p$ represents total production.

$Ap$ represents the intermediate goods and services used in production, i.e. intermediate consumption.

So $p-Ap=(I-A)p$ represents net production, i.e. output minus input.


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