Cost-Push IO Price Models and Their Relation with Quantities

What is it about?

It is shown how, in the Type I single-region cost-push IO price model, under full competition, exogenous primary input price changes are fully passed on to all intermediate users that fully pass them on further, resulting in endogenous total and final output price changes. In the Type II interregional price model, additionally, consumption price changes are fully passed on in wage rates, while export price changes are fully passed on to importing regions or nations. Finally, it is shown how the IO price model may be combined with the IO quantity model by adding demand and supply price elasticities, which results in lower, more realistic price and quantity multipliers.

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