Supply And Demand Simulation Analysis
Supply and Demand Simulation
Supply and Demand Simulation The simulation for the supply and demand included management decisions involving two- bedroom rental apartments owned by GoodLife Management firm located in Atlantis. The property manager team job consisted of adjusting monthly rental rate for maximizing revenue based on quantity supplied apartments in the economy. Each scenario presented different economics factors, variables, and issues that required management decision as analyzed below. Supply and demand is a fundamental analytical concept of microeconomics stating that price determination is set when the quantity of a good or services supplied meets the quantity demanded (Colander, 2010). The idea of demand represents the general activities of wants and desires demanded by consumers, whereas supply indicates those of producers. Another concept of microeconomics determined by the point of interaction in which quantity of supply equals to quantity of demand is known as equilibrium (Colander, 2010). The law of …show more content…
supply and demand commands the price to be at the equilibrium point. Prices lower than the equilibrium will increase by reason of extra demand factors. If prices exceed the equilibrium price, it will decrease by reason of less demand factors. In the supply and demand simulation because GoodLife is the only firm in Atlantis that rents apartments it has established a macroeconomics concept in the market as a monopoly (Marshchak, 2010).
According to the macroeconomics principles of monopoly GoodLife is free to raise and lower monopoly prices to maximize revenue potential as they see fit in the current market. In the beginning of the simulation because GoodLife were the only firm that supplied rental apartment the government established the macroeconomics concept of a price ceiling in the market (Marshchak, 2010). The government imposed price ceiling protected the Atlantis consumer from higher rental price above the price of equilibrium. However, a price ceiling can cause an equilibrium affect between supply and demand. For example, if the rental price was at the price ceiling and the apartment demand increase, the supply of available apartments would decrease (Marshchak,
2010). A shift in the supply and demand curve depends on any variable factors added to or taken away from the basic unit of supply or demand (University of Phoenix, 2010). This becomes apparent in the scenario of apartments out of vogue. Based on the variables that decreased the demand for two-bedroom apartment. GoodLife expected that future demand for apartments would also decrease. Management made the decision to convert some of the available apartment supply into condominiums for sale. The result has created both a decrease in demand and supply of apartments. Therefore, both the demand curve and the supply curve shift to the left. The equilibrium rental rate depends on the effects of the management decision. This created a temporary shortage at the original equilibrium rental rate; because the new supply quantity curve is less than the new demand quantity curve. The result would consist of the management adjusting and establishing a new equilibrium for the decrease in two-bedroom apartments and the new supply of condominiums for sale. Comparing the new equilibrium to the original it shows that the equilibrium quantity is less in the original, but higher in the new equilibrium (Marshchak, 2010). Management should offer an incentive for raising the number of tenants for leasing more apartments and maximizing revenue. As the rental rate increase, quantity demand will decrease leading to a reduction in shortage. The adjustment should continue until the reestablishment of equilibrium between the new demand and supply curve (University of Phoenix, 2010). When applying the things learned and understood about supply and demand from the simulation it provides knowledge for understanding basic economic principles surrounding prices of real-world products. The price of a product is either high, low, or remains constant, according to consumer demand and the availability of supply. High-demand for a product with low supply availability will create conditions in the market for supporting a higher price. However low-demand for a product with high supply availability will create conditions in the market for supporting a lower price. Added variables, such as management decisions, revenue, and imposed government price ceiling along with consumer consumption affects the economic factors for sustaining price equilibrium of a given product (University of Phoenix, 2010). Microeconomics concepts have many factors that affect shifts in supply and demand on the equilibrium price and quantity. Supply consists of the relationship between price of goods and the quantity of goods that producers willingly produce and sell. The law of supply states that when price of goods rises, and everything else remains constant the quantity of goods supplied also rises (Colander, 2010). The quantity supplied takes into consideration the effects of microeconomics factors, such as price of goods, price of inputs, labor cost, and the number of competitors. The price of goods and quantity of goods consumer willingly buy creates demands. In the law of demand if price of good rises and everything else remains the same the quantity of the goods demanded will decrease (Colander, 2010). Quantity demanded depends on the microeconomics concepts of prices, income, population, and preferences. When putting supply and demand together the equilibrium is present where the supply and demand curve crosses each other. Equilibrium consists of equal price and quantity that satisfies market clearing conditions. Effects of any of these variables may cause a shift in supply and demand for the equilibrium of price and quantity. The concepts of macroeconomics generally deal with the average price of all goods and services and how they influence the operation of a market economy. Supply decision effects suppliers’ willingness for producing and selling at the prevailing market price. Demand is the relationship between prices of product consumer purchasing certain quality (Colander, 2010). Equilibrium of supply and demand happens when price fall to a level the consumer can afford. The shifts effect on supply and demand creates positive or negative influences. For example, positive supply, and demand shift increase demand, but negative supply, and demand shift decrease demand. This simulation shows how government imposed interventions assist in maintaining price equilibrium for supply and demand in the economy. In the simulation the price elasticity of demand affected consumer purchasing and GoodLife pricing strategy throughout the different scenarios for many reasons. The price elasticity depended on consumer’s responsiveness to management decisions, quantity demand, supply, and prices (Colander, 2010). The simulation showed how over the years consumers changed his or her demands and needs forcing GoodLife adjusting accommodations and prices to the economy. The simulation showed how supply and demand factors effects the shift in supply and demand curve. It also showed how equilibrium is met and how price ceilings and other factors can affect it. Price elasticity affect how well consumer respond to changing prices, demands, and supplies as they happen. This simulation provided a teaching and learning tool for understanding how microeconomics factors of supply and demand influence price levels within the economy.
References
Colander, D. (2010). Economics (8th ed.). New York, NY: McGraw-Hill.
Marshchak, J. (August). More Pitfalls in Demand and Supply Curve Analysis. Quarterly Journal of Economics, 48(4), p749-766. Retrieved from http://ehis.ebscohost.com/eds/pdfviewer/pdfviewer?sid=e0171d7e-f9e9-43a7-94c2-29b909c3d2a9%40sessionmgr15&vid=3&hid=1
University of Phoenix. (2010). Economics for Business Simulation. Retrieved from https://ecampus.phoenix.edu/secure/aapd/vendors/tata/UBAMsims/economics1/economics1_supply_demand_simulation.html
Supply and Demand Simulation The simulation for the supply and demand included management decisions involving two- bedroom rental apartments owned by GoodLife Management firm located in Atlantis. The property manager team job consisted of adjusting monthly rental rate for maximizing revenue based on quantity supplied apartments in the economy. Each scenario presented different economics factors, variables, and issues that required management decision as analyzed below. Supply and demand is a fundamental analytical concept of microeconomics stating that price determination is set when the quantity of a good or services supplied meets the quantity demanded (Colander, 2010). The idea of demand represents the general activities of wants and desires demanded by consumers, whereas supply indicates those of producers. Another concept of microeconomics determined by the point of interaction in which quantity of supply equals to quantity of demand is known as equilibrium (Colander, 2010). The law of …show more content…
supply and demand commands the price to be at the equilibrium point. Prices lower than the equilibrium will increase by reason of extra demand factors. If prices exceed the equilibrium price, it will decrease by reason of less demand factors. In the supply and demand simulation because GoodLife is the only firm in Atlantis that rents apartments it has established a macroeconomics concept in the market as a monopoly (Marshchak, 2010).
According to the macroeconomics principles of monopoly GoodLife is free to raise and lower monopoly prices to maximize revenue potential as they see fit in the current market. In the beginning of the simulation because GoodLife were the only firm that supplied rental apartment the government established the macroeconomics concept of a price ceiling in the market (Marshchak, 2010). The government imposed price ceiling protected the Atlantis consumer from higher rental price above the price of equilibrium. However, a price ceiling can cause an equilibrium affect between supply and demand. For example, if the rental price was at the price ceiling and the apartment demand increase, the supply of available apartments would decrease (Marshchak,
2010). A shift in the supply and demand curve depends on any variable factors added to or taken away from the basic unit of supply or demand (University of Phoenix, 2010). This becomes apparent in the scenario of apartments out of vogue. Based on the variables that decreased the demand for two-bedroom apartment. GoodLife expected that future demand for apartments would also decrease. Management made the decision to convert some of the available apartment supply into condominiums for sale. The result has created both a decrease in demand and supply of apartments. Therefore, both the demand curve and the supply curve shift to the left. The equilibrium rental rate depends on the effects of the management decision. This created a temporary shortage at the original equilibrium rental rate; because the new supply quantity curve is less than the new demand quantity curve. The result would consist of the management adjusting and establishing a new equilibrium for the decrease in two-bedroom apartments and the new supply of condominiums for sale. Comparing the new equilibrium to the original it shows that the equilibrium quantity is less in the original, but higher in the new equilibrium (Marshchak, 2010). Management should offer an incentive for raising the number of tenants for leasing more apartments and maximizing revenue. As the rental rate increase, quantity demand will decrease leading to a reduction in shortage. The adjustment should continue until the reestablishment of equilibrium between the new demand and supply curve (University of Phoenix, 2010). When applying the things learned and understood about supply and demand from the simulation it provides knowledge for understanding basic economic principles surrounding prices of real-world products. The price of a product is either high, low, or remains constant, according to consumer demand and the availability of supply. High-demand for a product with low supply availability will create conditions in the market for supporting a higher price. However low-demand for a product with high supply availability will create conditions in the market for supporting a lower price. Added variables, such as management decisions, revenue, and imposed government price ceiling along with consumer consumption affects the economic factors for sustaining price equilibrium of a given product (University of Phoenix, 2010). Microeconomics concepts have many factors that affect shifts in supply and demand on the equilibrium price and quantity. Supply consists of the relationship between price of goods and the quantity of goods that producers willingly produce and sell. The law of supply states that when price of goods rises, and everything else remains constant the quantity of goods supplied also rises (Colander, 2010). The quantity supplied takes into consideration the effects of microeconomics factors, such as price of goods, price of inputs, labor cost, and the number of competitors. The price of goods and quantity of goods consumer willingly buy creates demands. In the law of demand if price of good rises and everything else remains the same the quantity of the goods demanded will decrease (Colander, 2010). Quantity demanded depends on the microeconomics concepts of prices, income, population, and preferences. When putting supply and demand together the equilibrium is present where the supply and demand curve crosses each other. Equilibrium consists of equal price and quantity that satisfies market clearing conditions. Effects of any of these variables may cause a shift in supply and demand for the equilibrium of price and quantity. The concepts of macroeconomics generally deal with the average price of all goods and services and how they influence the operation of a market economy. Supply decision effects suppliers’ willingness for producing and selling at the prevailing market price. Demand is the relationship between prices of product consumer purchasing certain quality (Colander, 2010). Equilibrium of supply and demand happens when price fall to a level the consumer can afford. The shifts effect on supply and demand creates positive or negative influences. For example, positive supply, and demand shift increase demand, but negative supply, and demand shift decrease demand. This simulation shows how government imposed interventions assist in maintaining price equilibrium for supply and demand in the economy. In the simulation the price elasticity of demand affected consumer purchasing and GoodLife pricing strategy throughout the different scenarios for many reasons. The price elasticity depended on consumer’s responsiveness to management decisions, quantity demand, supply, and prices (Colander, 2010). The simulation showed how over the years consumers changed his or her demands and needs forcing GoodLife adjusting accommodations and prices to the economy. The simulation showed how supply and demand factors effects the shift in supply and demand curve. It also showed how equilibrium is met and how price ceilings and other factors can affect it. Price elasticity affect how well consumer respond to changing prices, demands, and supplies as they happen. This simulation provided a teaching and learning tool for understanding how microeconomics factors of supply and demand influence price levels within the economy.
References
Colander, D. (2010). Economics (8th ed.). New York, NY: McGraw-Hill.
Marshchak, J. (August). More Pitfalls in Demand and Supply Curve Analysis. Quarterly Journal of Economics, 48(4), p749-766. Retrieved from http://ehis.ebscohost.com/eds/pdfviewer/pdfviewer?sid=e0171d7e-f9e9-43a7-94c2-29b909c3d2a9%40sessionmgr15&vid=3&hid=1
University of Phoenix. (2010). Economics for Business Simulation. Retrieved from https://ecampus.phoenix.edu/secure/aapd/vendors/tata/UBAMsims/economics1/economics1_supply_demand_simulation.html