Final Consumption

Abstract

In this chapter, we consider an open model of a decentralized economic system that uses Leontief technologies. Apart from the output and consumption of production resources, this model also captures final consumption and demand for consumers goods. The volumes of this demand are determined by endogenous variables. We describe a planning algorithm that generates a limit cycle in the sequence of normalized vectors of final consumption. The second model presented in this chapter is intended to describe economic systems that use production hierarchies. Here, the sectors of a given system are categorized into two groups. The first group consists of sectors that output production resources. The second group of sectors produces final consumer goods. These sectors plan their production based on the observed demand for their products. A plan of any sector from the first group is based on the orders for its product sent by the first group and on the projected amount of its product to be consumed by the first group. The planning algorithm considered leads to a limit cycle in the sequence of normalized outputs.