Supply_and_Demand

Supply and Demand Simulation Supply and demand is a theory of product and wants of that product. An increase in supply will lower prices if not accompanied by an increase in demand and an increase in demand will raise prices unless accompanied by an increase in supply. The supply and demand simulation found on the student website consists of microeconomics and macroeconomics. The simulation presents shifts in the demand and supply curve, equilibrium, price, and quantity. The change in the demands of the two-bedroom apartments affects the price and availability of the apartments. This paper will discuss microeconomics, macroeconomics, supply curve, demand curve, and equilibrium as they relate to the supply and demand simulation. Microeconomic and Macroeconomic Principles One microeconomic principle and concept from the simulation is supply and demand, according to the law of demand, more quantities of a product or service will be bought at a lower price than at a high price. To maximize revenue, Goodlife Management lowered rental rates to decrease vacancy rates. Lowering the rental rate created a larger demand for the two-bedroom apartments. Another microeconomic example occurs when Lintech, Inc. moved into town creating more jobs and an increase in population. With the increase in population, the demand increased for two-bedroom apartments, triggering Goodlife Management to raise rental rates. One example of macroeconomics is the survey showing the number of people working in Atlantis living in surrounding cities because of the lower rental rates. Another example of macroeconomics is the rental cap of $1,550 the government put on monthly rent for two-bedroom apartments. The purpose of the cap is to make living in the city more affordable for middle-class citizens to live in the city. Supply Curve and Demand Curve Shift The shift in the demand curve happened when Lintech, Inc. moved into the city of Atlantis. Lintech moving into the city created an increase in population and which created a larger demand for two-bedroom apartment. The shift of demand for two-bedroom apartment created by the increase in population, the equilibrium price, and quantity will increase. Goodlife Management will be able to lease at a higher rate caused by the increase in equilibrium price and demand. A shift in the supply curve happened when a decrease in demand for apartments and an increase in demand for condominiums occurred. To keep up with demand, Goodlife Management converted a portion of the apartments into condominiums. Affects the Equilibrium Price, Quantity, and Decision Making The shift in supply of apartment caused by the decrease in demand; equilibrium price rises but the quantity decreases. The shift in supply causes Goodlife Management to increase the rental rates to decrease their vacancies. Real-World Product An example of supply and demand on a real-world product is game stations, Ipads, and cell phones. Technology changes almost daily and so many people want the new improved product. Developming a good, understanding of the laws of supply and demand helps create good choices and decisions when purchasing new items. Demand on new improved game stations, Ipads, and certain cell phones are so high that most stores sell out even before the product hits the shelves. The individuals who are always upgrading their products for the new improved version will sell their barely used product at a discount. When the demand is so high for the new product, the price is usually high. A few months after the new product, the companies are already looking for ways to improve it and stories begin to leak and create hype for the next product. The prices usually begin to drop after a few months creating the best time to purchase the new improved product. Knowing demand will be high and supply will be low, one should wait a short few months and save hundreds of dollars and purchase when the hype has decreased creating a decrease in demand and an increase in supply. Microeconomic Concepts Microeconomics is the actions of individuals, firms, and consumers and how their decisions affect supply and demand. When demand creates change in the equilibrium price, the quantity will change in the same direction. If demand increases, the equilibrium price and quantity will also increase. When supply changes, the equilibrium price and quantity will change in the opposite direction. Understanding supply and demand, and how they affect each other, helps one understand how the curves and shifts happen and how they affect the equilibrium price Macroeconomic Concepts Macroeconomics deals with the performance, structure, behavior, and decision-making of the economy as a whole. Demand in macroeconomics account for consumption and investments. Supply in macroeconomics describes the quantity of national output at certain prices and those changes in national input, cause a shift in the supply curve. Price Elasticity Price elasticity is the percentage change in quantity demanded divided by the percentage change in price (Colander, 2010). The higher the elasticity, the higher demand changes in response to price changes. When elasticity is low, it is easy to increase price because there is little demand change. Price elasticity affects the consumer because people tend to shop for a deal and will purchase a similar product if the price is right. Price elasticity affects the Goodlife Management apartments because there is an increase in income and detached homes, giving the consumer options. Conclusion Decision makers usually do not have access to the demand or supply curve, the simulation provided valuable learning tools to help one understand how changes in situations affect supply and demand. Different situations cause increase in demand and a decrease in supply and finding the equilibrium can sometimes be difficult. The simulation could easily have been any company anywhere in the United States, the tools provided can be applied in today’s real world. Despite the changes in supply and demand, Goodlife managed to increase rent, decrease rent, and convert some apartments into condo’s to keep up the demands of the consumers.