Supply And Demand Simulation Research Paper

Supply and Demand Simulation

ECO/365
November 27, 2012
William Mason

Supply and Demand Simulation
This supply and demand simulation teaches how to respond to changes due to the shifts in the market. Whenever there is a change that means several factors that need to be looked at. A number of factors, including price increases or decreases, cause changes in supply and demand. If demand rises, the supplier should increase supply to achieve larger profits from increased sales at higher prices. An increase in the rental price of two roomed apartments caused a decrease in the demand of houses by a large margin. Suppliers were willing to supply more houses at higher prices and fewer homes at reduced rents.
A rise in the population of Atlantis
led to a bigger demand for housing which then led the rise in rental prices. By doing this the suppliers were more willing to supply more units at improved rental prices. When the population decreased, the demand for housing dropped and the available units were leased out at lower prices. Naturally, the suppliers were not very happy about supplying all their units to the markets at reduced prices.
Available substitutes affect the demand and the supply of a commodity. A number of people in Atlantis owned homes in the suburbs and did not need to rent houses in town. The demand for houses dropped and this made the suppliers cut back on supply or reduce rents in bid to attract more clients.
When buyer trends moved from two bedrooms apartments to detached homes, the change in demand for apartments dropped while the demand for detached homes increased.
Because of this result the suppliers increased the supply of detached homes.
A negative shift in demand results in smaller amounts and because of this suppliers have to reduce supply. A positive shift in demand leads to a rise in amounts demanded and a positive shift in supply as suppliers get ready to take advantage of higher prices. As a supplier, the lower the price means the less the individual can supply to the market during a bid to raise the prices when demand increases (Griffiths & Wall, 2000). With a rise in demand, an individual would supply more units to the market so that they can make a profit from higher rental prices.
The concepts of demand and supply, as demonstrated in the simulation, teach how to respond to changes due to shifts in market fundamentals. Whenever there is a change in demand due to any of the factors affecting it, an entrepreneur should be quick to respond appropriately to maintain one’s share of the market. This may involve lowering the price and a reduction in the number of units supplied. In the event that demand rises, the supplier should increase supply to higher profits from increased sales at higher prices. In different situations, it may be smarter for the company to invest in products that the consumers prefer rather than having high price fights (Griffiths & Wall,
2000).
As far as what I would do to bring the knowledge of the situation to the aspect of my work environment, there is not a lot of room for economic decisions considering I work for the Department of Defense. That being said I work around aircraft, and I would look into the number of average flights per month, and how much each flight costs. I would then try to lower the flying by one or two flights to lower the budget while still being efficient in the normal daily program requirements. In doing this the Department of Defense could potentially save millions a year that can be used in an array of other programs and maybe even creating a few extra jobs.

Reference
Griffiths, A., & Wall, S. (2000). Indermediate Microeconomics (2nd ed.). Uk: Longman Group United kingdom.