Model Description

This model of the simple economy employs the high level of abstraction that I referred to on the prior page. The units of measure used in this model, and those models that follow, consist of flows of economic units per year and stocks of economic units. By using this higher level of abstraction, the rest of these models remain logically consistent in representing economies of all scales—from the lowest to the highest levels of abstraction.

Running Simulations

Click the run simulation button (similar to how you did in the first model or the system dynamics introduction) and you will see a panel open with a chart that maps out the values generated by the system based on the assumptions built into the model.

You may want to wait to run simulations because they get more interesting in the next step.

Conclusion for Step 3

This simple model contains the fundamental elements of economies of all scales:

They produce
They consume
Production they don't consume remains as savings.

That's it.

But, this model has a bit of a problem. In this model Savings would either not change, it would continue to pile up without end (or it would decline to zero with consumption rates more than 1,000 economic units per year).

From your position, as an outsider, that makes little sense. Why let savings pile up and not use them? That question addresses important elements that we have not yet added to the model.

Although the model accurately depicts the flow of economic goods through the system, it does not yet account for:

The feedback of information, and
Decisions regulating the production rate or the consumption rate

We will address those deficiencies in the next step...