step_4

Approach 2: Using Solver

Step 4: Verify the Model and Calibration

You should now be able to solve the model. Click the Solve button in the Solver dialog and the following dialog should appear. Note that, if the model has been calibrated correctly, none of the values should change. Click OK to exit.

You can now try some comparative statics by changing any exogenous value or parameter. For example, if income increases by 5 percent and the price of Y doubles, what will happen? Launching Solver should generate the following solution:

Everything is now working correctly in the numerical part of the model.

<Step 3> <Step 4> <Step 5>