Microeconomics and the laws of supply demand
Supply and Demand Simulation
Since the early years of commerce, supply and demand have been a huge factor in the capitalist business system. For this assignment I was asked to take part in a simulation as a source for my paper. In the simulation I had to take part of a series of important financial decisions for a fictitious apartment management company named GoodLife and see how each decision would be impacted by different economic factors.
In this simulation, I was able to see that the microeconomics concepts could be labeled in the changes of supply and demand as well as the equilibrium in the apartment market. That is because the factors would only affect a small part of the apartment market in which the company on this scenario operates. The macroeconomics ...view middle of the document...
This means that the equilibrium price is lower because the demand decreased even though the supply (quantity of apartments) stayed the same. Now if the curve was to the right, it will show that there is an increase in available apartments. Like for example if the company buys more buildings or they built new ones. Now if the demand stays the same, the best thing Goodlife can do is to lower rent prices to be able to fill every apartment they have vacant.
Supply demand and Curve shifts
Microeconomics factors will have an important role when we look at the equilibrium price and quantity. The most important factor I saw in this scenario that determines the rental price is changes to supply and demand. This scenario gave several examples how different factors caused prices to increase and decrease.
Macroeconomic factor on the other hand, can cause supply and demand curves to shift and cause a significant impact on the equilibrium price and on the quantity of apartments the company has available. An example was when the government put a price ceiling. This controlled the price of the rent, preventing GoodLife from getting as much money as they could get for their apartments if there was a good demand for their apartments. This scenario also makes it hard to see the impact of elasticity while the price ceiling is in effect.
Price elasticity of demand
On this simulation, I also learned how important price elasticity of demand is. It showed me how the demand changes every time the price changes. Price elasticity of demand shows the law of demand and the relation between price and quantity. For example, every time the price of the apartments changed. Like the higher the rent got the less quantity demand for the apartments there was.
In the end this scenario gave me a good insight of the economics aspects of business, as well as opened my eyes to the importance of supply and demand.