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Sale with price inverse to supply

Description:

The sales model shows the operation of sales and money in a simple system. In the model, products (Q) accumulate from a process which produces J units per time. These products are sold to the market, and money is received in exchange. The money received is stored in a bank acount (M), and then paid out in proportion to the amount in the account.

Examples:

  • A citrus farmer produces oranges, stores them and sells them. The price he receives fluctuates according to the supply.
  • A craftsman who produces wooden chairs at a steady rate. If he builds up his inventory, the price per chair will go down.
    		• Diagram

    Variables:

    M = money
    Q = products
    P = price

    Equations:

    P = K4/Q
    DM = P*K2*Q - K3*M
    DQ = J - K2*Q - K1*Q

    Simulation:

    The graph shows the changes of M(blue), P(green) and Q(red) over a time period.
    Source code: Sales.java

    "What if" Experiments:

  • If your uncle gives you 150 chairs to start your business, how much difference will it make to the money in your bank account?
  • What is the effect of doubling production on the accumulation of money and on the amount of product per dollar the consumer can buy?