Supply and Demand Simulation
ECO/365 Principles of Microeconomics
Atlantis is a small and well maintained city. Positive aspects about living in this city include large parks, jogging paths, and maintained streets and sidewalks. When a person is deciding to move into the city of Atlantis or move around within the city, two bedroom apartments become one of many places to look for housing. GoodLife Management is a company who rents and leases many of the two bedroom apartments within the town. Many of the company’s apartments are vacant and the company is looking to understand and change the vacancy rate. Using principles of macro and microeconomics, it becomes apparent how ...view middle of the document...
There are a number of real world examples that show how macro and microeconomic principles are related to life. In addition, understanding the price elasticity of demand can also help a person to understand the importance of how lower and higher demand can have a direct impact on prices.
Macro and Microeconomic Principles
Supply and demand are the two microeconomic principles that appear in this simulation. When discussing the rental apartments in Atlantis, the simulation discusses the supply and demand associated with them.
Macroeconomic principles also appear in the simulation. These principles relate more to the adjustments occurring in the population flow when discussing whether it is a good idea to rent or not to rent. Other factors relating to this situation also would be considered principles of macroeconomics. Colander (2010) explains, in the law of demand, that as the quantity of goods and services increases, the price of those goods and services decreases. Colander (2010) goes on to explain the law of supply which states that as the quantity of goods and services decreases at the same time as the decrease in price.
In the simulation a demonstration of the law of demand and the law of supply was apparent. The number of two bedroom apartments in the company reached a point of 2,000. The rental company sought a way to increase the current revenue within the company. To do this, they looked at the current vacancy rates and brainstormed ways to decrease the number of vacant apartment. To decrease the vacancy rate from 28% to 15%, the company decided to lower the rent. This raised the rate of demand, making more people anxious to move into apartments with lower rental costs. As the demand for the lower rental costs rise, the vacancy rate, or the supply, decreased.
The Shifts in Supply and Demand Curves
As the number of available apartments increases, the supply curve shifts right. As the rental rate rises, the supply also rises. By leasing all 2,500 apartments, the rental rate will be pushed to $1,500. The demand curve begins to shift down as the rental rate and supply of the apartments increase. If the apartment company increases the rental rate to the $1,500, the demand for the apartments will decrease. To reach the equilibrium the apartment agency must decrease the rental rate to $1,050. By doing this, the number of demanded units is equal to the number supplied.
Applying this to the Real World and the Workplace
The concepts of supply and demand are felt and seen all around the world. I used to work for a company that manufactured clothing. From a macroeconomic perspective, it is apparent that everyone needs clothes. Clothes are not necessarily considered a luxury item and are considered more of a necessary item. Therefore, the demand for clothing will always be high.
The company is always trying to...