Supply And Demand Simulation Research Paper
Supply and Demand Simulation
ECO/365
August 12, 2013
Supply and Demand Simulation In this paper I will discuss and identify two microeconomics and two macroeconomics principles or concepts from the simulation. I will explain why I have categorized these principles or concepts as macroeconomic or microeconomic. I will also identify at least one shift of the supply curve and one shift of the demand curve in the simulation, and what causes the shifts. I will discuss how each shift, and analyze how it would affect the equilibrium price, quantity, and decision making.
Two microeconomics and two macroeconomics principles or concepts
Microeconomic theory considers economic reasoning from the viewpoint of individuals and …show more content…
firms and builds up to an analysis of the whole economy. Microeconomics is the study of individual choice, and how that choice is influenced by economic forces. Microeconomics studies such things as the pricing policies of firms, households’ decisions on what to buy, and how markets allocate resources among alternative ends. Our discussion of opportunity cost was based on microeconomic theory. In the simulation scenarios one and three are microeconomics principles because they deal with the part of economics that is about single factors and the effects of individual decisions. In both scenarios the levels of vacancy were individual decisions and prices were adjusted to meet the decision expectations. The fourth and seventh scenarios are examples of macroeconomics.
In the fourth scenario the population is going to increase due to a new corporation is moving into town and all their employees. This would affect all of Atlantis by increasing the population, lower the unemployment rate by creating new jobs, and growth in many other sectors will take place primarily in real estate since everyone will need places to live. In response to the growth Good Life’s apartment rates will increase from $1150 to $1400 due to the higher demand. As the demand for apartments goes up the prices go up as well, but eventually as shown in the seventh scenario some families could not afford the high rent prices so the government stepped in and put a ceiling rental …show more content…
prices.
Shifts in the Supply and Demand Curves
The demand curve in scenario one shifts down as the rental rates and the vacancy rate go down which mean more units are rented out. This is how to handle a surplus which in turn leads to lower equilibrium prices. If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price. The supply curve in scenario shifts up as the rental rates go up because a zero vacancy rate is being achieved. This is leading towards a shortage because the supply has run out which leads to higher equilibrium prices. If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price. If demand remains unchanged and supply increases, a surplus occurs, leading to a lower equilibrium price. If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher equilibrium price.
Equilibrium price, quantity, and decision making
Changing the equilibrium of the curves means a couple of different things when it comes to the price GoodLife would want to charge in order to rent as many apartments as they can.
The change to the supply curve would normally cause a shortage in supply and demand would increase, therefore allowing GoodLife to raise their prices. The decrease in demand without change to supply would decrease prices because of the surplus of supply. However, because demand and supply decreased due to the change in preference and a loss of rental units, both curves moved toward the right. This moves means that the demand decreased as well as the supply, and to keep the equilibrium of the rental properties, GoodLife would have to decease their prices in order to keep consumers renting apartments instead of buying
condos.
Supply and demand from my understanding of a real-world product which I am familiar
Recently I was talking to a classmate about the demand for Guns and Ammunition in the United States and how it is making headlines. Ammunition in the United States is hard to come by these days because of the increase in demand due to the government changing gun laws and making restrictions. Try going to your neighborhood Wal-Mart to buy some .22 bullets for target shooting, or a couple of boxes of shotgun shells, and you’ll discover what hunters and gun enthusiasts have been muttering about for months now: The shelves are bare. Manufacturers are operating flat-out but can’t keep up with demand, as consumers snap up every box of ammo as soon as it comes on the market. Wal-Mart limits buyers to three boxes when they’re available, and Cabela‘s is limiting online orders to one box per day of the popular .22 long shells increasingly used as cheap ammo for target rifles and pistols (Fisher, 2013).
These current events have shown me the true nature of microeconomics and how different circumstances can change the preference of the population and how it affects prices and the supply available. Supply and demand allows me to understand why the price of orange juice goes up or why gasoline cannot keep a steady price. The principles of macroeconomics show me how the unemployment rate, politics, and federal taxes and tariffs can adjust the supply and demand as easily as frost in Florida can. (Colander, 2010) But these principles also show me elasticity in prices and how some things do not change. For example, demand of the GoodLife apartments would remain a constant demand if not for other circumstances, meaning that the price was inelastic. (Colander, 2010) However, certain changes such as a change in preference could decrease the demand, thus forcing GoodLife to raise prices in order to maintain total revenue. Now being a month-to-month rental company, supply and demand would constantly be changing, but if GoodLife found a good price that allowed renters to rent at fair prices, their demand would become inelastic as well as the prices for the apartments. This simulation put micro- and macroeconomics in perspective when it comes to real world scenarios. Just like the price of anything else, supply and demand are what makes the prices, so really high prices are no one to blame but the consumer that demand more product. Different principles were displayed throughout the simulation for both micro- and macroeconomics, and both were relative to the simulation in regards to real-life scenario. Of course, more principles affect the economy and how economists analyze the economy, but these principles have been the building blocks to understanding how and why prices rise or fall.
REFERENCES
Fisher, D. (2013). The Bullet Bubble: Is Ammo The Next Bitcoin, Or Gold In The 1970s. Retrieved from http://www.forbes.com/sites/danielfisher/2013/04/09/the-bullet-bubble-is-ammo-the-next-bitcoin-or-gold-in-the-1970s/
ECO/365
August 12, 2013
Supply and Demand Simulation In this paper I will discuss and identify two microeconomics and two macroeconomics principles or concepts from the simulation. I will explain why I have categorized these principles or concepts as macroeconomic or microeconomic. I will also identify at least one shift of the supply curve and one shift of the demand curve in the simulation, and what causes the shifts. I will discuss how each shift, and analyze how it would affect the equilibrium price, quantity, and decision making.
Two microeconomics and two macroeconomics principles or concepts
Microeconomic theory considers economic reasoning from the viewpoint of individuals and …show more content…
firms and builds up to an analysis of the whole economy. Microeconomics is the study of individual choice, and how that choice is influenced by economic forces. Microeconomics studies such things as the pricing policies of firms, households’ decisions on what to buy, and how markets allocate resources among alternative ends. Our discussion of opportunity cost was based on microeconomic theory. In the simulation scenarios one and three are microeconomics principles because they deal with the part of economics that is about single factors and the effects of individual decisions. In both scenarios the levels of vacancy were individual decisions and prices were adjusted to meet the decision expectations. The fourth and seventh scenarios are examples of macroeconomics.
In the fourth scenario the population is going to increase due to a new corporation is moving into town and all their employees. This would affect all of Atlantis by increasing the population, lower the unemployment rate by creating new jobs, and growth in many other sectors will take place primarily in real estate since everyone will need places to live. In response to the growth Good Life’s apartment rates will increase from $1150 to $1400 due to the higher demand. As the demand for apartments goes up the prices go up as well, but eventually as shown in the seventh scenario some families could not afford the high rent prices so the government stepped in and put a ceiling rental …show more content…
prices.
Shifts in the Supply and Demand Curves
The demand curve in scenario one shifts down as the rental rates and the vacancy rate go down which mean more units are rented out. This is how to handle a surplus which in turn leads to lower equilibrium prices. If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price. The supply curve in scenario shifts up as the rental rates go up because a zero vacancy rate is being achieved. This is leading towards a shortage because the supply has run out which leads to higher equilibrium prices. If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price. If demand remains unchanged and supply increases, a surplus occurs, leading to a lower equilibrium price. If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher equilibrium price.
Equilibrium price, quantity, and decision making
Changing the equilibrium of the curves means a couple of different things when it comes to the price GoodLife would want to charge in order to rent as many apartments as they can.
The change to the supply curve would normally cause a shortage in supply and demand would increase, therefore allowing GoodLife to raise their prices. The decrease in demand without change to supply would decrease prices because of the surplus of supply. However, because demand and supply decreased due to the change in preference and a loss of rental units, both curves moved toward the right. This moves means that the demand decreased as well as the supply, and to keep the equilibrium of the rental properties, GoodLife would have to decease their prices in order to keep consumers renting apartments instead of buying
condos.
Supply and demand from my understanding of a real-world product which I am familiar
Recently I was talking to a classmate about the demand for Guns and Ammunition in the United States and how it is making headlines. Ammunition in the United States is hard to come by these days because of the increase in demand due to the government changing gun laws and making restrictions. Try going to your neighborhood Wal-Mart to buy some .22 bullets for target shooting, or a couple of boxes of shotgun shells, and you’ll discover what hunters and gun enthusiasts have been muttering about for months now: The shelves are bare. Manufacturers are operating flat-out but can’t keep up with demand, as consumers snap up every box of ammo as soon as it comes on the market. Wal-Mart limits buyers to three boxes when they’re available, and Cabela‘s is limiting online orders to one box per day of the popular .22 long shells increasingly used as cheap ammo for target rifles and pistols (Fisher, 2013).
These current events have shown me the true nature of microeconomics and how different circumstances can change the preference of the population and how it affects prices and the supply available. Supply and demand allows me to understand why the price of orange juice goes up or why gasoline cannot keep a steady price. The principles of macroeconomics show me how the unemployment rate, politics, and federal taxes and tariffs can adjust the supply and demand as easily as frost in Florida can. (Colander, 2010) But these principles also show me elasticity in prices and how some things do not change. For example, demand of the GoodLife apartments would remain a constant demand if not for other circumstances, meaning that the price was inelastic. (Colander, 2010) However, certain changes such as a change in preference could decrease the demand, thus forcing GoodLife to raise prices in order to maintain total revenue. Now being a month-to-month rental company, supply and demand would constantly be changing, but if GoodLife found a good price that allowed renters to rent at fair prices, their demand would become inelastic as well as the prices for the apartments. This simulation put micro- and macroeconomics in perspective when it comes to real world scenarios. Just like the price of anything else, supply and demand are what makes the prices, so really high prices are no one to blame but the consumer that demand more product. Different principles were displayed throughout the simulation for both micro- and macroeconomics, and both were relative to the simulation in regards to real-life scenario. Of course, more principles affect the economy and how economists analyze the economy, but these principles have been the building blocks to understanding how and why prices rise or fall.
REFERENCES
Fisher, D. (2013). The Bullet Bubble: Is Ammo The Next Bitcoin, Or Gold In The 1970s. Retrieved from http://www.forbes.com/sites/danielfisher/2013/04/09/the-bullet-bubble-is-ammo-the-next-bitcoin-or-gold-in-the-1970s/