Question

Draw and Explain System Dynamics Diagram of a Market Model (In own words)?

Answer 1

ANSWER :

System dynamics analyzes the forces operating in a system in order to determine their influence on the stability or growth of the system. Here, stability is determined by the rates of changes of different variables.

Consider the following system dynamics diagram of market model.

This diagram depicts a modified exponential growth model in which a variable increases in value at first at an increas­ing rate and then later at adecreasing rate until it reaches an upper limit. This corresponds to a typical marketing situation. At first, as the product is intro­duced into the market, sales will increase rapidly. Later as the saturation point is approached, the increase in sales will gradually taper off. Next, consider the various symbols used in the System Dynamics model. The number of products sold can be viewed as a level in a reservoir of products. Levels are represented by boxes. Rates are represented by boxes with valves attached. The constants of the system are indicated by the symbol Ө.

The differential equation corresponding to the system diagram is:

ẋ = k(X - x) -----(1)

with initial condition x(o) = 0
The solution is x = X(1 − e−kt) which is known as a modified exponential curve.
A computer simulation model would solve (1) for various values of k, the sales rate constant, and X, the market limit.