ECONOMIC SUPPLY & DEMAND

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20 D-43885. TESTING THE MODELPutting the model together, we get the following:Supply and DemandSupplyDemandsupplyinventoryshipmentsdemandInventory Ratio~supply price scheduledesired inventorydemand price schedule~desired inventory coveragePriceeffect on pricedesired price~price change delaypricechange in priceFigure 10: The complete Supply and Demand model
D-4388 21At this point, you may wish to build the STELLA model of supply and demand.The exercises that follow do not require you to run the model, but you may wish toperform some simulations of your own. The complete model equations are included inthe appendix, beginning on page 33.You will analyze three scenarios in this section. The first scenario will be a basecase run to observe the response of the model to a step increase in demand. Then youwill analyze how the behavior of the system varies from the base case when you changethe desired inventory coverage and the price change delay. Solutions start on page 28.5.1 Increase in DemandFor the base case run, assume the following conditions:• initial price = $15 per article of clothing• desired inventory coverage = 4 weeks• price change delay = 15 weeks#1: What should inventory be in order for the system to be in equilibrium? (Hint: lookat the supply price schedule and the demand price schedule) _______________________Discuss your reasoning below.________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________#2: Assume that the system is in equilibrium. Price and inventory remain the sameuntil the tenth week, at which time there is a permanent increase in demand of 10 units.(At each price, the consumer demand is 10 articles per week higher.) What are the newequilibrium values for price and inventory? ____________________________________
Page 1 and 2: D-4388 1ECONOMIC SUPPLY & DEMANDbyJ
Page 3 and 4: D-4388 3Table of Contents1. ABSTRAC
Page 5 and 6: D-4388 52. INTRODUCTIONThis paper e
Page 7 and 8: D-4388 7Demand Limited byability to
Page 9 and 10: D-4388 93.4 Interaction Between Sup
Page 11 and 12: D-4388 11$50DemandSupplyPrice per a
Page 13 and 14: D-4388 134.2 DemandDemandinventorys
Page 15 and 16: D-4388 154.3 SupplyBelow is the sup
Page 17 and 18: D-4388 17increase, it takes larger
Page 19: D-4388 19Figure 9: Effect on Price
Page 23 and 24: D-4388 235.2 Desired Inventory Cove
Page 25 and 26: D-4388 25The graph below shows the
Page 27 and 28: D-4388 276. SOLUTIONS TO EXERCISES6
Page 29 and 30: D-4388 296.2 Desired Inventory Cove
Page 31 and 32: D-4388 31#8, #9: The graphs below s
Page 33 and 34: D-4388 33effect_on_price = GRAPH(in
Page 35: D-4388 351 : price 2 : desired pric

ECONOMIC SUPPLY & DEMAND

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