indirect vs induced effects

Hi Madalene. Your graph about the direct, indirect, and induced effects for your non-economists type colleagues might be a bit challenging to explain and understand. We understand the idea behind visually displaying the different components of economic impact because at times it is easier to grasp. However, it sounds like a verbal explanation might be an option as well. Below are fairly easy to understanding definitions of the different impact effects in the IMPLAN Model. Direct Effect: The initial change in production, expenditures, employment, or Labor Income dollars in the study region. To increase production, the directly-affected sector must purchase more inputs – these are the first round of indirect effects Indirect Effects: Stem from input purchases by firms supplying inputs to the directly impact firm/industry. The firms that supply these inputs must now purchase more of their own inputs to meet the new demand for their output – these are the additional rounds of indirect effects Induced Effects: Stem from employees spending their wages. So, in addition to purchasing inputs, the directly affected firm must hire additional labor. When those workers spend their income, it generates the first round of induced effects. These expenditures further expand local economic activity by increasing the demand for other businesses, generating additional rounds of induced effects. You might want to share these definitions with your audience as well. Between the graph and the definitions, it might make it a little easier for them to understand these concepts. Please let us know if we can be of further help to you.