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Microeconomics And The Laws Of Supply And Demand

830 words - 4 pages

Microeconomics and the Laws of Supply and Demand
Your NAME
ECO/365
July 6, 2015
INSTRUCTOR NAME

Microeconomics and the Laws of Supply and Demand
The simulation showed how a shift in the supply curve or the demand curve can lead to significant changes to the economic standing of the business. When the demand curve shifts downward or to the left it showed a decrease in demand from renters thus yielding less apartments rented. This happened when the new company who moved into the area had a higher focus in ownership rather than renting, this forced the management company to have to lower prices to compensate for the decrease in demand. This shift cause the equilibrium price to be ...view middle of the document...

Macroeconomic factors cause shifts in supply and demand that have adverse reactions in the equilibrium of price and quantity. Such things as price ceilings, which limit the amount of rent a company can charge, causes the management company to not be able to obtain the highest rent possible should there be the demand for the apartments they have available. This causes a ripple effect when it comes to price elasticity, because when a price ceiling is applied it is nearly impossible to measure the impact that price elasticity has on the market.
Microeconomic factors also play a major role when it comes to equilibrium price and quantity. Changes to supply and demand are the biggest influencer in the determination of price. Throughout the simulation there were multiple instances where changes to the supply and demand curves affected the price the management company could charge. The non-static economic conditions of the area forced the company to have to consistently rise and lower prices to try and achieve equilibrium, while still maximizing profits.
Price Elasticity
Price elasticity throughout simulation was very high, which measures the responsiveness of the quantity demanded to a change in price of a good or service. When goods and services have many substitutes they also have many variations in price, when the consumer is given all these options they tend to choose the lower priced options, when the opposite occurs the consumer is inclined to pay a premium, this reduces...

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