Supply and Demand

Running Head: SUPPLY AND DEMAND

Supply and Demand Simulation

University of Phoenix

Microeconomics

ECO365

Darrell Neron

April 28, 2008

Supply and Demand Simulation

The supply and demand simulation for the microeconomics course was very enlightening. The simulation was very helpful in developing a solid understanding of the concepts of supply and demand. The exercise covered the concepts of changes in supply and demand, equilibrium, price elasticity, and price ceilings.

The simulation was based on a management company that manages apartments in the fictional city of Atlantis. There were a few situations that caused changes and shifts in supply and demand. The first cause addressed in the exercise was employment. A large company moved its headquarters to Atlantis. This caused demand for apartments to increase. As a result, the management company increased its supply.

Another change that affected supply and demand was the management company lowering the price of their apartments. They had higher vacancies and they wanted to maximize profits. By lowering the price the company was able to increase demand for the apartments.

Additional changes occurred when the added population decided that they wanted to purchase detached homes rather than rent apartments. As a result, the management company had a reduction in demand. This drove down the price of the apartments. The company also had to find other solutions. In order to reduce supply they converted several of the apartments to condominiums.

Shifts and changes in supply and demand have a tremendous impact on decision making. If demand is high a company needs to act quickly to determine ways to increase supply in order to take advantage of the higher demand. Additionally, decision making is affected when there is excess supply. An organization needs to determine if they want to sell the excess supply or keep it until demand increases.

Equilibrium...