Atlantis Case
This paper examines the economic factor at work in supply and demand of rental apartments in the city of Atlantis. Acting as the property manager for GoodLife Management in Atlantis, the simulation asks the user to make pricing and supply decisions based on changes in the market. Changes in price, population, average salaries, tastes, and government regulations all affect the market in a number of ways.
Decisions affected by Changes in Supply and DemandThe first decision is what price to set the monthly rental at to maximize revenue and lower vacancies to as low as possible. Lowering the rent by about 200 hundred dollars lowered the vacancy rate down to 5% and increased revenue by about $100,000. The manager achieved this because of the inversely …show more content…
proportional relationship of price to quantity demanded. He rented more apartments as the price went down.
The next two scenarios ask the manager to determine what price at which he would be willing to rent out 2500 apartments.
The shape of the supply curve determined that GoodLife Management would be willing to supply 2500 apartments at $1550. They would need to charge that much to cover escalating incremental costs. This would be problematic, however, because the demand for apartments is much lower at that price. The intersection, or equilibrium, of the two curves suggests a price of $1050 at which the quality demanded would be 2000 apartments.
When Lintech Inc. moved its operations in to Atlantis, the demand for rental apartments increased, shifting the demand curve to the right, and supply remained unchanged. GoodLife increased the price of their apartments to $1400 in order to balance the demand for their apartments to the price at which they were willing to supply them economically. At this rate, they were able to lease 2350 apartments.
When Lintech increased their salaries, more people were able to afford to purchase homes, which led to a shift in the demand for rental apartments to the left. The lower demand forced GoodLife to lower rental prices to $1300 in order to increase the quantity of apartments demanded. At this rate, they were able to lease 2250 …show more content…
apartments.
As demand for rental apartments continued to decline, GoodLife sold some apartments as condominiums; thus reducing supply. Demand has shifted further to the left and the decrease in supply shifted the supply curve to the left as well. By creating a shortage in the market, GoodLife forces an increase in rental price to $1475; at that price, they were able to lease 1900 apartments.
As the population of Atlantis further increased, City Council thought it best to institute rental price controls.
At the ceiling of $1550.00, GoodLife Management is only able to supply 2275 rental apartments cost effectively. The demand, however, is for 3150 apartments, so City Council has caused a shortage of 875 units by implementing a price ceiling.
Workplace ApplicationAll of the scenarios and decisions demonstrated in the simulation are in applicable to TELUS. The government, or at least its agent, the CRTC, establishes price caps on incumbent service providers, but not on new entrants to the market, in order to encourage completion. This results in a somewhat complex situation, but for the most part consumers are still willing to pay more for service that is more reliable and because they are loyal to the TELUS brand. The demand curve is very steep and so price change has a very marginal effect on quantity demanded.
Changing technologies however, have shifted the demand curve for basic telephone service. Demand has shift to the left due to alternative products such as cellular and internet telephony. One product that TELUS is will to supply in large numbers is ADSL internet access because customers are demanding it at a price that is profitable to
TELUS.
While the writer does not take part in pricing or supply decisions, understanding the factors that drive demand do help him to anticipate and prepare for increases in work volumes brought about by those changes.
Results of the AssessmentThe property manager for GoodLife Management in Atlantis was required to make several changes in the price of rental apartments in order to balance with the demand and optimize revenues. He was able to do this buy simply adjusting the price, but eventually had to change the supply side by converting apartments to condominiums fir sale in order to keep prices at a level where he could offer apartments at a price that properly offset his costs. When demand finally shifted again with the influx of new businesses to Atlantis, the City put rent control in place that caused a shortage of rental space in Atlantis.
The simulation demonstrated that changes in price, population, average salaries, tastes, and government regulations all affect the rental apartment market in a number of ways.
Decisions affected by Changes in Supply and DemandThe first decision is what price to set the monthly rental at to maximize revenue and lower vacancies to as low as possible. Lowering the rent by about 200 hundred dollars lowered the vacancy rate down to 5% and increased revenue by about $100,000. The manager achieved this because of the inversely …show more content…
proportional relationship of price to quantity demanded. He rented more apartments as the price went down.
The next two scenarios ask the manager to determine what price at which he would be willing to rent out 2500 apartments.
The shape of the supply curve determined that GoodLife Management would be willing to supply 2500 apartments at $1550. They would need to charge that much to cover escalating incremental costs. This would be problematic, however, because the demand for apartments is much lower at that price. The intersection, or equilibrium, of the two curves suggests a price of $1050 at which the quality demanded would be 2000 apartments.
When Lintech Inc. moved its operations in to Atlantis, the demand for rental apartments increased, shifting the demand curve to the right, and supply remained unchanged. GoodLife increased the price of their apartments to $1400 in order to balance the demand for their apartments to the price at which they were willing to supply them economically. At this rate, they were able to lease 2350 apartments.
When Lintech increased their salaries, more people were able to afford to purchase homes, which led to a shift in the demand for rental apartments to the left. The lower demand forced GoodLife to lower rental prices to $1300 in order to increase the quantity of apartments demanded. At this rate, they were able to lease 2250 …show more content…
apartments.
As demand for rental apartments continued to decline, GoodLife sold some apartments as condominiums; thus reducing supply. Demand has shifted further to the left and the decrease in supply shifted the supply curve to the left as well. By creating a shortage in the market, GoodLife forces an increase in rental price to $1475; at that price, they were able to lease 1900 apartments.
As the population of Atlantis further increased, City Council thought it best to institute rental price controls.
At the ceiling of $1550.00, GoodLife Management is only able to supply 2275 rental apartments cost effectively. The demand, however, is for 3150 apartments, so City Council has caused a shortage of 875 units by implementing a price ceiling.
Workplace ApplicationAll of the scenarios and decisions demonstrated in the simulation are in applicable to TELUS. The government, or at least its agent, the CRTC, establishes price caps on incumbent service providers, but not on new entrants to the market, in order to encourage completion. This results in a somewhat complex situation, but for the most part consumers are still willing to pay more for service that is more reliable and because they are loyal to the TELUS brand. The demand curve is very steep and so price change has a very marginal effect on quantity demanded.
Changing technologies however, have shifted the demand curve for basic telephone service. Demand has shift to the left due to alternative products such as cellular and internet telephony. One product that TELUS is will to supply in large numbers is ADSL internet access because customers are demanding it at a price that is profitable to
TELUS.
While the writer does not take part in pricing or supply decisions, understanding the factors that drive demand do help him to anticipate and prepare for increases in work volumes brought about by those changes.
Results of the AssessmentThe property manager for GoodLife Management in Atlantis was required to make several changes in the price of rental apartments in order to balance with the demand and optimize revenues. He was able to do this buy simply adjusting the price, but eventually had to change the supply side by converting apartments to condominiums fir sale in order to keep prices at a level where he could offer apartments at a price that properly offset his costs. When demand finally shifted again with the influx of new businesses to Atlantis, the City put rent control in place that caused a shortage of rental space in Atlantis.
The simulation demonstrated that changes in price, population, average salaries, tastes, and government regulations all affect the rental apartment market in a number of ways.