Price changes

Comments

1 comment

  • Avatar
    IMPLAN Support
    Hello Ben, It sounds like you might have enough information to bring to IMPLAN to do what you are looking for. To try to be clear, we have embedded our answers with your questions in our post. "Is there a way in IMPLAN to distinguish between the increased output due to passenger volume changes and increased output due to price changes. For example, if I input the total output change to the airline industry," If you have the elasticity, and the price change, you can calculate the change in the cost of the goods or services. You will need to convert the quantity price relationships to a dollar value. One of the key assumptions of IMPLAN and Input-Output Analysis is that prices are fixed and the model is static. http://implan.com/index.php?option=com_content&view=article&id=497:key-assumptions&catid=187&Itemid=2 "For example, if I input the total output change to the airline industry, IMPLAN shows that spending at restaurants would increase. However, that would seem to imply that more people are traveling (a change in volume) not a change in prices. " Because the Model is a fixed prices model and doesn't include any embedded elasticities you have make alterations to the underlying data information before you model your impact. Unless you feel this will impact the entire Industry, and thus every round of purchase of airlines, we would typically recommend making the modifications using Analysis-by-Parts. As part of the data you have do you know how much of change in Output is due to the price change? It sounds like this price change, since it isn't changing passenger purchases, is effecting either: a. Labor Income or b. profits or c. taxes. In effect then the price change is not changing the amount of Intermediate Expenditures being purchased, because costs are fixed (although if the price change is indicative of a change in cost of goods and services please let us know, and we can assist you with this as well), then we need to change the ratio of Intermediate Expenditures : Value Added based on the equation Output = Intermediate Expenditures + Value Added. In effect because of the price change you have more Value Added for the same quantity of Output. This can be modified with Analysis-by-Parts by importing the Industry Spending Pattern for your airline and normalizing the Events through the Events Options> Change All> Normalize Events. You can then enter into the Activity Level the value of Intermediate Expenditures associated to the Output value you are working with. The only aspect of Value Added that is modeled in IMPLAN is the Labor Income so if the changes are profits and/or taxes, you in effect will leak this value from the Multiplier Model and it will be carried only by the Direct Value Added and Output values. This link describes a little bit more about the mechanics of Analysis-by-Parts https://implan.com/index.php?option=com_content&view=article&id=373. Alternatively if you think it affects every round of airline purchases, and thus the underlying Multipliers for the region, the modifications can be made in the Customize menu to the Study Area Data information. Please let us know if you have any additional questions. IMPLAN Support Team
    0
    Comment actions Permalink

Please sign in to leave a comment.