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department), and part of the products are consumed as intermediate products in
the internal production plan of the enterprise (or department). There are complex
connections. The enterprise IO model is mainly used to solve the problems
of how to arrange the supply of various external purchases, how to optimally
arrange the production of the enterprise while ensuring that the market demand
is met.
(5) Dynamic IO model. For the static model, it does not include the time factor and
only shows the IO relationship in a certain period of time. A dynamic model that
introduces time changes and other factors can reflect the relationship between
input and output changes over time. The dynamic IO model is an economic
dynamic model that focuses on the structural changes in economic sectors. It
includes time change factors, focusing on the research and analysis of the quantitative relationship and internal relationship between the total investment and
composition of the country’s economy during the previous period and the scale
and structure of the production of various economic sectors in the subsequent
period.
3.7 Basic Assumptions of the Input-Output Model
The IO model is an abstract description of economic phenomena, so it is an economic
mathematical model. It can only reflect the main characteristics of economic objects,
but it cannot reproduce the prototype of economic objects without omission. Based
on this, when building the model, it is necessary to use scientific theory as the basis,
discard, or abstract away some secondary and non-essential factors and make reasonable assumptions. At the same time, as a mathematical model related to economics,
it also needs to link with actual economic phenomena and conditions and consider
some logical conditions that should be met in the process of model solving to ensure
the normal application of the model in economic applications.
3.7.1 “Pure Sector” (Same Nature) Assumption
The “pure sector” assumption means that any industrial sector only produces a
specific product of the same nature, has a single input structure, and uses only
one production technology to produce products. This assumption has the following
implications:
(1) All products belonging to the same production department can completely
replace each other, or these products themselves can be produced in a strict
proportional relationship;
(2) Any production department contains only a single input structure;
(3) There is no substitutability for products between different production departments. In other words, the same product or some similar substitutes cannot be
classified in different departments.
L. Chai et al.
department), and part of the products are consumed as intermediate products in
the internal production plan of the enterprise (or department). There are complex
connections. The enterprise IO model is mainly used to solve the problems
of how to arrange the supply of various external purchases, how to optimally
arrange the production of the enterprise while ensuring that the market demand
is met.
(5) Dynamic IO model. For the static model, it does not include the time factor and
only shows the IO relationship in a certain period of time. A dynamic model that
introduces time changes and other factors can reflect the relationship between
input and output changes over time. The dynamic IO model is an economic
dynamic model that focuses on the structural changes in economic sectors. It
includes time change factors, focusing on the research and analysis of the quantitative relationship and internal relationship between the total investment and
composition of the country’s economy during the previous period and the scale
and structure of the production of various economic sectors in the subsequent
period.
3.7 Basic Assumptions of the Input-Output Model
The IO model is an abstract description of economic phenomena, so it is an economic
mathematical model. It can only reflect the main characteristics of economic objects,
but it cannot reproduce the prototype of economic objects without omission. Based
on this, when building the model, it is necessary to use scientific theory as the basis,
discard, or abstract away some secondary and non-essential factors and make reasonable assumptions. At the same time, as a mathematical model related to economics,
it also needs to link with actual economic phenomena and conditions and consider
some logical conditions that should be met in the process of model solving to ensure
the normal application of the model in economic applications.
3.7.1 “Pure Sector” (Same Nature) Assumption
The “pure sector” assumption means that any industrial sector only produces a
specific product of the same nature, has a single input structure, and uses only
one production technology to produce products. This assumption has the following
implications:
(1) All products belonging to the same production department can completely
replace each other, or these products themselves can be produced in a strict
proportional relationship;
(2) Any production department contains only a single input structure;
(3) There is no substitutability for products between different production departments. In other words, the same product or some similar substitutes cannot be
classified in different departments.