Supply and Demand Simulation
The cause of change in supply and demand in this simulation was due to changes in supply and demand for apartment homes in Atlantis. The goal was to obtain a 15 percent vacancy rate while still maintaining the most possible revenue allowable. By lowering prices to $950 rent per month, demand increased 1900 apartments were filled. With the opening of Lintech Inc. and other companies the population increased. This population increase caused an increase in demand, shifting the curve to the right; GoodLife now has incentive to rent more apartments. Seven years later, consumers shift their preference to detached homes causing a shift to the left in the demand curve and generating a surplus in apartments. The demand shift caused the supply to move down to reach equilibrium at 2,250 apartments rented at $1300 per month. GoodLife made the decision to convert apartments into condos to sell in order to keep up with the market demands and consumer change in preference. This caused a shift in both the supply and demand curves because consumers preferred detached homes.
Shifts in supply and demand affect decisions for any business. When the population increases, there will be an increase in demand for apartment rentals. Being that there is a higher demand, people will generally pay a higher price to obtain a product when lower quantities are available. When determining what the rental rate should be, I took that into consideration. With a higher demand, I chose to increase the rental rates and with a lower demand I would choose a lower rental rate.
Four key points from the reading assignments that were emphasized in the simulation include: 1. the laws of supply and demand. Demand, the higher the price of a good the less amount consumers will demand and lower the price the higher the demand. This causes a downward slope on the demand curve. Supply, reveals the quantities that will be sold at a certain price, the higher the price the more quantity is supplied, causing an upward slope on the supply curve. 2. The equilibrium concept; Colander defines equilibrium as “a concept in which opposing dynamic forces cancel each other out.” He goes on to state that the “equilibrium price is the price toward which the invisible hand drives the market.” Simply stated, equilibrium can be defined as the point at which quantity demanded exactly meets the supply available. Therefore, no shortage of surplus would exist once equilibrium is met. If prices are below the equilibrium point, then the quantity demanded will exceed the quantity supplied which will lead to shortages. When