Supply and Demand Simulation

Supply and Demand Simulation

Econ/365

January 14, 2013

Supply and Demand Simulation

In the Supply and Demand Simulation Good Life Management, leases and manages two bedroom apartments in the city of Atlantis. There are many changes during the simulation that affect the economic planning by Good Life Management. There are major shifts in both the supply and demand curves due to increases in population and income. When making decisions for the cost of the equilibrium price you need to adjust the supply and demand curves to reflect the current market conditions in your area. Increases in demand usually result in an increase in equilibrium price as the increases in supply decrease the equilibrium price. From reading Economics by D.C. Colander prices of two bedroom apartments in the city of Atlantis are price elasticity with regards to both supply and demand. The simulation presented the impact of making various pricing decisions based on your boss’s expectations. In year one just bringing the vacancy rate down to 15% does not necessarily maximize revenue. A vacancy rate of 5% maximizes revenue for Good Life Management.

Supply and Demand Curve Shifts

In year five when Lintech Inc.’s move of their business to Atlantis drove the increased demand of two bedroom apartments in the city. The demand curve shifts to the right increasing the equilibrium price of two bedroom apartments. The demand increases and the supply of the two bedroom apartments does not change therefore equilibrium rental price of an apartment increases. In July of year seven, Good Life Management decides to change some of the two bedroom apartments into condominiums, therefore decreasing the supply of two bedroom apartments. When this occurs demand does not change however the equilibrium price increases, due to the decreased supply. As the text states when the change in price is greater than the change in quantity means that the price of two bedroom apartments in the city of...