Eco 365 Week 3

Supply and Demand Simulation

Chris Hall

ECO 365

August 8, 2013

Supply and Demand Simulation

Supply and demand is crucial concept in both macroeconomic and microeconomic settings. The week two simulation showed how a fictional apartment management company in the city of Atlantis is impacted by various economic factors. The microeconomic concepts can be categorized as changes in supply and demand and equilibrium, because these topics only affected the small apartment market in which the company operates. Macroeconomic concepts can be categorized as price elasticity and price ceilings because they have a broad impact on the overall region beyond the local apartment market.

The simulation showed that a shift in the supply curve or the demand curve could cause significant changes to the economic environment. For example, if the demand curve shifted to the left, it would show a decrease in demand from consumers and cause fewer apartments to be filled. This situation occurred in the simulation due to a widespread desire for property ownership and forced the management company to lower prices to compensate. The equilibrium price became lower because demand decreased, while supply and quantity remained consistent.

Similarly, if the supply curve were to shift to the right, it would indicate an increase in available apartments to rent. This situation could occur if the management company expanded the building to accommodate more units. Assuming there was no change in demand, the solution in this case would also be to lower prices to achieve full occupancy. However, this could be a very profitable decision if there was sufficient demand to fill the new quantity being supplied.

Ultimately, the company must make business decisions based on these economic factors to make sure their price and supply quantity are within realistic economic boundaries. If the apartments are not being rented...