STRATEGY DYNAMICS

SESSION 2

MODELING WITH VENSIM

PGP 2021-23
4th February 2023
LEARNING TO USE VENSIM
 Title Bar Main Toolbar
Menu

Sketch Tools

THE
VENSIM
USER
INTERFACE

Analysis Tools

Status Bar
The Story

You have opened a savings bank account with a balance of ₹1000 and plan to
make an annual deposit of ₹5000, and withdraw 3% of the account balance
during the year to meet expenses. The annual interest rate for the account is
7%.

You also need to plan for the following capital expenditure over the next 10
years: ₹1000 per year for first 3 years, ₹2000 per year for years 4 and 5, and
₹1500 per year for years 6 to 10.

Develop a Vensim model of the savings account incorporating the transactions

discussed above.
 MODEL SETTINGS
Start Vensim
Click the New Model button,
or select the menu item File > New Model

Click on the button Model in the Menu Toolbar.

Click on Settings. The dialogue box for model settings

will appear.

In the Time Bounds dialog, type 0 for INITIAL TIME,

type 9 for FINAL TIME, type 1 for TIME STEP.

Click on the drop-down box for Units for Time, and select Year.
Click on OK (or Press Enter).
 BUILDING A SIMULATION MODEL

Select the Box Variable sketch tool and click somewhere in the
middle of the sketch.
An editing box will appear. Type the word Account Balance, and press the enter key.

Select the Rate sketch tool. Click once (single click and release of the mouse button)
about 5 cm to the left of the Level Account Balance,
then move the cursor to Account Balance and click once again.
Type the name growth and press Enter.

Click once on the Level Account Balance then move the cursor about 5 cm to the right
And click again. Type the name depletion and press Enter.
Select the Variable sketch tool.

Click on the sketch below growth, type interest rate and press Enter.

Click on the sketch below depletion, type withdrawal rate and press Enter.
Select the Arrow sketch tool.

Click once on interest rate then once on growth.

Click once on withdrawal rate, then once on depletion.

Click once on Account Balance, then once on the sketch a little below and left of
Account Balance, and then once on the rate variable growth.

Click once on Account Balance, then once on the sketch a little below and right of
Account Balance, and then once on the rate variable depletion.
Select the Variable sketch tool.

Click on the sketch above growth, type deposits and press Enter.

Click on the sketch above depletion, type block expenses rate and press Enter.

Select the button “Shadow Variable” from the Sketch Toolbar.

Click once above block expenses.
A drop down menu will appear from which select the
shadow variable Time and click on tab OK.
Select the Arrow sketch tool.

Click once on deposits then once on growth.

Click once on block expenses, then once on depletion.

Click once on Time, then once on block expenses.

Click the Save button and save your model, naming the model SD1.
 WRITING EQUATIONS
Click on the Equations sketch tool. All the variables in the model will
turn black. The highlights are used as a visible check of completeness.
Click on the variable growth.
The Equation editor opens. The type of variable is auxiliary.
(Vensim considers Rates and Auxiliaries to be the same type of variable).

Complete the following equation by typing

in or by clicking on the symbols.

Account Balance*interest rate+deposits

Type in the units of measurement

Rs/year in the Units: box.
Click on the variable depletion.
The Equation editor opens. Complete the following equation by typing in or by clicking
on the symbols

Account Balance*withdrawal rate+block expenses

Type in the units of measurement

Rs/year in the Units box.
Click on the variable interest rate.

The Equation editor opens. Insert the value 0.07 in the equations box.

Type in the units of measurement Dmnl in the Units box.

Click on the variable withdrawal rate.

The Equation editor opens. Insert the value 0.03 in the equations box.

Type in the units of measurement Dmnl in the Units box.

Click OK.
Click on variable deposits.

Type in the numbers 5000 in the editing box.

Type in the units Rs/year.

Click OK.
Click on variable block expense.

Click on shadow variable Time to take it to

the equations editor.
Click on sub-type. A dropdown menu will appear
with Two options – with Initial, and with Lookup.
Choose the second option with Lookup.
Click on the button as graph.
A graph Lookup box will appear.

Enter the values 0 to 9 in the respective

input boxes.

Enter the following values in the corresponding

Output boxes – 1000, 1000, 1000, 2000, 2000,
1500, 1500, 1500, 1500, 1500. Click OK.
Enter unit Rs/year. Click OK.
Click on box variable Account Balance.

The drop down box now shows the type of variable: Level.

In the Initial Value editing box, type in 10000.

Type in the units Rs in the units box.

Click on OK.
 CHECKING FOR MODEL SYNTAX AND UNIT ERRORS

Before we simulate the model, we should check it for errors in equations and units.

Select Model > Check Model from the menu; you should get a message saying
“Model is OK”. If the model has errors, then the Equation Editor opens up with the
Variable containing the error.

Select Model > Units Check from the menu; you should get a message saying
“Units are AOK”, or else an units error will be generated.
 RUNNING A SIMULATION

Double click on the Simulation results file name editing box on the Main Toolbar
and type sim1 for the first run name.

Click on Simulate button.

 MODEL ANALYSIS
Graph and Table Tools
Click on the Level Account Balance in the sketch to select the variable.

Click on the Graph tool.

A graph of Account Balance is generated.

Click on the Table tool.

Click on the following variables:
Account Balance
growth
depletion
deposits
block expenses
Click on the Graph tool.
The respective graphs of the above
variables will be generated.

Click on the Table tool.

The values of the selected variables over the 10 year period will be generated.
 CAUSES AND USES STRIP GRAPH
Select the variable Account Balance.
Click on the button Causes Tree in the Analysis toolset.
A Causes Tree for the variable will show up.

Select the variable Account Balance.

Click on the button Uses Tree in the Analysis toolset.
A Uses Tree for the variable will show up.
 SENSITIVITY TESTING
So far, the computations have been carried out based on the assumption that the savings
bank account enjoys an interest rate of 7% per annum.

What is the effect on the account balance over the ten year period if the interest rate increase
or decreases? We shall carry out two simulations with interest rate assumed to be 6% and
8% respectively.

Enter the name sim2 in the simulation results file name box.

Change the value of interest rate from 7% to 6%.

Click on the simulation button.

Now, enter the name sim3 in the simulation results file name box.

Change the value of interest rate to 8%.

Click on the simulation button.

Now the model stores the output from the two simulations – sim1 and sim2, along
with the baseline simulation with interest rate vale at 7%.

The output graph of the baseline and simulation results for the box variable account
balance is given below.
 SYNTHESIM

Through SYNTHESIM (Synthesis of Simulations) you can synthesize model structure

and simulation behavior. Vensim allows you to see the results of simulations
superimposed on the model diagrams and instantly updates these displays as you
change model Constants and Lookups.

Click on the SyntheSim Icon.

Once you do this you will see small graphs over all dynamic variables and sliders
will be created for all the constants. As you move a slider the model will be
simulated and the graphs automatically drawn. deposits <Time> block expenses

Account Balance
growth depletion

interest rate withdrawal rate

 DOCUMENTATION
Click on the button Documents All

All the equations will be shown.

(01) Account Balance= INTEG (
growth-depletion,
Click on Export windows content 10000)
Units: Rs
(02) block expenses = WITH LOOKUP (
Time,
([(0,0)-(10,2000)],(0,1000),(1,1000),(2,1000),(3,2000),
(4,2000),(5,1500),(6,1500),(7,1500),(8,1500),(9,1500) ))
Units: Rs
(03) depletion=
Account Balance*withdrawal rate+block expenses
Units: Rs
(04) deposits=
5000
Units: Rs
(05) FINAL TIME = 9
Units: Year
The final time for the simulation.
 DOCUMENTATION

(06) growth=
Account Balance*interest rate+deposits
Units: Rs
(07) INITIAL TIME = 0
Units: Year
The initial time for the simulation.
(08) interest rate=
0.07
Units: Dmnl
(09) SAVEPER =
TIME STEP
Units: Year [0,?]
The frequency with which output is stored.
(10) TIME STEP = 1
Units: Year [0,?]
The time step for the simulation.
(11) withdrawal rate=
0.03
Units: Dmnl
THANK YOU