Supply_and_Demand

Supply and Demand Simulation Robert Oklesson ECO365 May 8, 2013 Gary Wiessner Supply and Demand Simulation So what is supply and demand' Supply and demand is the price determination in a market, it is the unit price of a product, and the price will vary depending on the public demand for that particular product. In this essay I will discuss how supply and demand on a housing market affects the city of Atlantis. The two different microeconomic concepts I believe for this simulation are the vacancy rate for the two bedroom apartments and also the pricing for these apartments by maximizing vacancy rates and accommodating the increase in demand due to a new company coming to town. The first macroeconomics concepts is that local government has put a price ceiling on two bedroom apartments to make them affordable for lower income families. The second macroeconomics concept is that a recent housing survey showed families are living in other cities due to pricing. The shift in the supply curve was that the two bedroom apartment rentals were priced to high in which it made a high vacancy rate of 28%. The shift in the demand curve happened when Susan Hearst suggested that the vacancy rate needed to be around 15%, which made the company have to lower rental costs to reach this vacancy goal. Of course when a company adjusts their prices of a particular product, in this simulation it is two bedroom apartments for rent, this move affects the quantity of apartments available. As a company raises the price of the apartment the availability of apartments will increase and the quantity of available apartments will decrease when housing prices decline. This simulation might be helpful at my workplace due to the supply and demand of contractors needing airspace range resources and even aircraft to accomplish their test missions. In my real-life I have come across the effects of supply and demand in the housing market. With the low prices of homes currently creates a high demand in the market, but the supply of housing for sale is not at the level that is needed to meet the demand. Trying to find a perfect balance between supply and demand is a true balancing act. The microeconomics of the consumers demand and the firms pricing affect both the consumer and the rental firm. The firms pricing has to be at the perfect price so that the vacancy rate is at the lowest % possible, also trying to have low vacancy rates means that rental prices are at a reasonable price. The concept of the macroeconomics was that the local government had a pricing ceiling on two bedroom apartments in the town of Atlantis. When the demand for two bedroom apartment went on the rise when a company had moved into town, the rental firm benefited from the increase in demand but was limited to the price ceiling imposed by the government. Even though there was a demand for rental most people chose to live in other cities because the pricing was more reasonable. The change in the apartment rentals price creates a greater change in demand, when the rent was lowered the demand for these apartments went up. The constant changes in these rentals prices by the firm affect the consumer’s confidence in the company. So after doing this simulation it made me a bit more knowledgeable about how supply and demand go hand in hand and affect each other considerably. A consumers demand of a particular product makes a company happy because when the demand is there for that product a company can adjust the price of the product. Reference Colander, D. C. (2010). Economics (8th ed.). New York, NY: McGraw-Hill.