How Economic Base Theory is Used to Model a Regional Economy (VIDEO)

In this video lecture, Adrienne Johnson, Director of Research at the Economic Growth Engine in Memphis, Tennessee, provides an introduction to economic base theory, a simple, two-sector model for understanding and quantifying regional economic activity.

This model categorizes industries by the amount of production demand they create in their local economies. It’s a fundamental and often-used method of measuring activity in the regional economy, and it focuses on the production and demand side of the economy. In this module, you will learn how economic analysts:

• Define two major types of industries categorized by the economic base theory model.
• Use the model to measure the contributions of different industries to a region’s gross domestic product (GDP).
• Develop a regional profile by using two different approaches to the model.

In the video module that follows, you’ll learn the next step for applying this model to your own local economy: using multipliers to predict regional economic impacts.