How can I isolate the impact of a production cost change on consumer prices?
When simulating a production cost change, consumer prices will automatically change, but the shift will be due to a multiplicity of interacting economic drivers set in motion by the cost shock. If you would like to isolate the impact of the production cost shock on consumer prices, you need to refer to three pieces of data: 1) The change in production cost by industry (in percentage terms) If you simulated the production cost change using a share variable, this is just your input value. If you entered the cost change as a dollar amount, you need to convert it to a percent by finding the total production costs for an industry for a given year. To do this, divide the static cost change in dollars by the total output of the industry. 2) The local market share of a given industry This number is already calculated and displayed in the model under trade shares in the “Options” pull down (when looking at regional control). Use the value of an industry’s trade share within its own region (alon
