The model incorporates supply, demand by households, demand by government and a foreign trade sector. On the supply side, total U.S. production is divided into 14 production sectors. Production functions are nested value-added CES functions with either two or three levels. The production function in the crude oil and natural gas sector treats the oil and gas as a single sector with two outputs and an elasticity of transformation between the two outputs. This is because firms producing these goods produce them jointly and simultaneously.
Otherwise capital is taken as a primary input.
In all CES functions, the inputs have positive substitution elasticities obtained from previous empirical studies. The 14 production sectors create 14 commodities. Any given commodity will use inputs from several of the production sectors. Consumers are divided into six income groups. In each group, household utility is a triple-nested CES function.