My question concerns how to model the impacts of a region-wide increase in water costs. For households, I assume I could treat an increase in water costs as a decrease in discretionary income, inputting the total cost change to the household sectors. For industries and institutions, however, the increase in water costs would represent an increase in their production costs. Without modifying the production functions of each industry, what would be the best way to model the output, income, and employment effects of a water cost hike on industries and institutions? Thank you.
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