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Why would it be difficult to use a simple two-sector model (economic base model) to capture...

Why would it be difficult to use a simple two-sector model (economic base model) to capture the interdependencies in a large metropolitan region?

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Answer #1

A simple two sector model consists of only the household sector and the firms or the business sector. It doesn't include any other aspects of the economy. The financial sector , the government and the interaction between the other economies is neglected.

The economic activities in a metropolitan region includes not only the household and business organizations but also it includes the financial institutions through which the money flows and government sector which controls and regulates the economy in case of any discrepancies. There will be interdependence between these sectors as the actions in one sector affect other sectors as well.Two sector model is inefficient to explain these interdependencies.

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