# Leontief Analysis of a Coal Town

(By Gregory V. Bard)

## Overview

In this interact, you will model the economy of a small coal producing region (such as West Virginia). This will be a small and simple example of Leontief Input-Output Analysis. We will track three industries: coal, electricity, and railways.

Coal is produced from mines, but railways are required to transport the ore to the refinery, which runs on electricity. Power plants burn the coal to make electricity, but they need railways to bring them the coal. The railroads run partly on electricity and partly on coal to deliver these resources. While there is no consumer demand nor external demand for the rail network connecting the coal mines, refineries, and power plants, there certainly is lots of demand for electric power among the commercial, residential and other industrial sectors. There is also some external industrial demand for coal---for example, in making steel out of iron.

• Suppose that producing a dollar's worth of coal requires
• 0.15 dollars of electricity,
• 0.30 dollars of railways,
• but no coal.
• Also suppose that making a dollar of electricity requires
• 0.25 dollars of coal,
• 0.05 dollars of electricity (to run the plant),
• and 0.20 dollars of railways.
• Furthermore suppose that a dollar of rail transport requires
• 0.25 dollars of coal,
• 0.10 dollars of electricity,
• and 0.05 dollars of rail transport (e.g. repositioning, repair, and depot maintenance).
• Finally suppose that
• the external demand for coal is worth 10 million dollars,
• the external demand for electricity is worth 100 million dollars, but that
• there is no external demand for these particular rail lines.
• How much (in dollars) should be produced of coal, electricity, and railroads?

## Instructions

The insturctions for this one are really easy...

Just move the sliders around until you have a surplus of 10 million in coal, 100 million in electricity, and 0 in rails. Remember, the unit is millions of dollars, therefore 10.0000000000 really means \$10,000,000.

If you are curious how the interact works internally, you might want to click "show audit."