Generate What If Simulation Analysis Using Spreadsheets

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What if simulation model is now utilized to detect and prevent or eliminate different conflicts within a system. Learn how to use this method if you wish to exploit spreadsheets through this article. Check additional information about what if simulation.

Sensitive analysis or what if simulation is a method that is used to change the model or situation parameters in order to really find out what exactly the impact of those changes will be. In simpler terms, this type of analysis is used for the variations in the outputs on different mathematical models and how these uncertainties could be allocated either qualitatively or quantitatively to every variation source in the model inputs. With what if simulation, you can investigate whether the mathematical study that you are conducting is correct.

Mathematical models are actually used in social sciences, economics and natural sciences. These models are generally utilized in solving different types of issues or problems especially when they do not allow you to gain a clear understanding regarding the relationship between the output variables and the input factors. If you are interested in what if analysis, you can use spreadsheets which can be a well suited method in simulating the outcomes based upon the variations in the input parameters. When it comes to creating what if simulation using spreadsheets, make sure that the models are engaging and relevant.

Step one is to make sure that you are able to represent the interrelationship between the markets that you would like to study. An example of this is the consequences on the market costs and the number of milk and tea if there is a decline in the supply of coffee. According to theories, the demand for tea will significantly increase while the milk demand will fall particularly if milk is consumed together with coffee and not with tea. Using the spreadsheet, it should be able to illustrate how the change in one market will imply on the balance in the quantity and price in other various markets.

One of the primary elements that you will worry about is the model, which should be based upon the interrelated markets that you are studying. In the example given above, they are milk, coffee and tea and the customers view tea and coffee as substitutes. You will also need to know how to represent every market using the demand and supply conditions. In the case of the coffee market, one of the formulas here is Qs = c + dP + H + T where Q represents the quantity of coffee, s pertains to supply, c means coffee, d is the elasticity of the price of the supply of coffee, H represents the present harvest conditions and T is the taxation level on producers. You will also need to get the supply and demand equations for the other markets namely tea and milk.

After that, you should know the expected outcomes. An increase in the supply will generally mean improved harvest which will then cause the coffee price to decrease. When using what if simulation with the spreadsheet, you will need to check that the model is acting correctly. Typically, you will need to perform a walk through exercise whose main aim is to ensure that the spreadsheet output corresponds well with the walk through exercise outcome.

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