Introductory to Input

Output Analysis
Rini Novrianti Sutardjo Tui, ST, MBA, MT

Mineral
Economics

Circular Flow View of The Economy

$$ Consumption Spending
(Yi)
Goods & Services
Households

Businesses

Businesses

Labor

$$ Wages & Salaries

Households
buy the output
of business:
final demand
or Yi

Households sell
labor & other
inputs to
business as
inputs to
production

Businesses purchase from

other businesses to produce
their own goods / services.
This is intermediate demand or
xij (output of industry i sold to
industry j)

Input Output Relationship

Direct Relationship

Impact upon sector that directly uses

output from other sector as its input

Indirect Relationship

Impact upon sector that doesnt use

output from other sector as its input

Additional Relationship

Indirect impact with longer extent

among sectors

Explaining flow
between industries
in term of
production rate of
each sectors

Purposes of Input Output Table

Descriptive
framework to
explain relationship
among sectors and
industries, and
between input and
output

Tool to measure
effects of change
towards activities of
sectors, and
towards inputs and
outputs

Input Output
Table

Economic Sectors
Primary sectors
Sectors that use natural resources as their basis
of activities

Secondary sectors
Sectors that use materials from primary sectors
as their raw materials

Tertiary sectors
Instead of producing goods, these sectors
provide services

Grouping Economic Activities

Economic Activities
Base criteria of grouping

Horizontal
grouping is

sectors grouping
based on similarity of
inputs structures,
even though there
are differences on
outputs utilization.

Vertical
grouping is

sectors grouping
based on goods or
service produced,
usually based on
stages of production.

Assumption on Table of I O

Homogenity

Proportion
ality

Additivity

Requires that each sector produces a single

output with single input structure, and
there is no automatic substitution between
sectors.
Requires that in production, relationship
between input and output is a linear
function.

Requires that impact of total production in

various sectors is produced by each sector
separately.

Application of Input Output Model

Predicts impacts of
final demands
towards output,
added value, import,
taxes, and labours
intake.

Notices sectors with

dominant effects
towards economy,
and sectors that are
sensitive towards
economic growth.

Overviews
consistency and
weakness of various
statistical data.

Strengths and Weaknesses of Input

Output Table
Strengths
Able to observe
economic sectors in
details therefore its
applicable for planning
process

Able to analyze linkage

and relationship among
sectors within an
economic system

Weaknesses
Input coefficients and
technologies are
assumed constant

Needs high cost in

developing input
output table

Potent to break
assumption of
homogenity

Mineral
Economics