Demand and Supply Simulation

Supply and Demand Simulation

Katie Runge

ECO 365

Ted Haas

May 6, 2013

Supply and Demand Simulation

In the scenario, the supply and demand simulation was based on the management of rental apartments by Good Life Management in the city of Atlantis. The scenario includes changes in supply and demand and showed how supply, demand, price elasticity, and equilibrium affect the decision made by the consumer and organizations. Atlantis is a small community with a large amount of activities, low issues with traffic, pollution, and crime.

Throughout the simulation, microeconomic and macroeconomic principles were addressed. In particular scenario one and three deal directly with microeconomics because these affect individual decisions. The first scenario discusses how the price on the rental by increasing the occupancy rate of all apartments in Atlantis. The third scenario decreases the surplus of apartments by decreasing the rent and filling available units. In both scenarios, the levels of vacancies were individual decisions and prices were increased or decreased to make apartments more appealing to the market. A principle of microeconomics that was addressed was the concepts of supply and demand. Good Life Management must make a decision involving the two-bedroom apartments on what to decrease the rent paid to realize maximum revenue. After analyzing how the effect of a lower rent affected the demand and supply curve, Good Life Management decided to lower the rent; this resulted in an increase in demand, whereas the supply of apartments decreases (Colander, 2011).

In scenarios, four and seven, the principles of macroeconomics were addressed. These are both examples of the concept of equilibrium. Equilibrium is supply and demand (opposing forces) cancel each other out (Colander, 2011). To achieve a balance of quantity demanded and supplied, Good...