Supply and Demand Simulation Eco 365

Supply and Demand Simulation

ECO 365

Supply and Demand Simulation

Goodlife Management is a company which rents two-bedroom apartments in the town of Atlantis on a month-to-month basis. (University of Phoenix, 2012) The simulation illustrates the change in supply and demand of the rentals, the implementation of price ceilings, changes in population, and changes in consumer’s preferences. This paper will discuss the key facts listed above as well analyze the results of the simulation.

Change in Supply and Demand he first scenario of the simulation dealt with how to lower the vacancy rate while maximizing revenue. (University of Phoenix, 2012) It was suggested that a vacancy rate of 15% would be ideal however I determined that at a rental rate of $950 dollars a month I could lower my vacancy rate to 5% thus maximizing my amount of revenue at $1.81 million. This scenario implements the law of demand. “Quantity demanded rises as price falls, keeping other things constant”. (University of Phoenix, 2012)

The second scenario proposes leasing 2,500 two-bedroom apartments at the most profitable rate. (University of Phoenix, 2012) The current rental rate is $ 1, 100; this rate proved not to be the most profitable. Raising the rental rate to $ 1, 550 thus allowed me to increase the quantity of our supply of rooms to 2,500 as proposed. This utilizes the law of supply; which states that quantity supplied rises keeping all other things constant. (Colander, 2010, p.239) Also indicating an upward slope of the supply curve.

Equilibrium Price

Scenario three presented making a decision of determining the equilibrium monthly rental rate for a two-bedroom apartment on a temporary lease. (University of Phoenix, 2012) Lowering the current rental rate to $ 1,050signified a surplus of 0 thus making quantity supplied and quantity demanded reach the point of equilibrium of 2,000. (University of Phoenix, 2012)Equilibrium price is identified as that price/point where quantity...