Cause Of Supply And Demand
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Cause of Supply and Demand
The cause for supply and demand in this simulation is caused by rental rate, reduction, reduce vacancy rate, and increase revenue. As Law of Demand describes inverse relationship between price and quantity demanded meaning higher prices raise the opportunity cost of purchasing a good. Consumers demand lower quantities and lower prices reduce the opportunity cost of purchasing a good; therefore consumers demand higher quantities. During year one as property manager for Good life property as decision maker I have decided in effort to reduce the vacancy rate the rental rate was reduced $1000 and the vacancy rate was reduced to ten percent. Although at rental rate of $1000 per month, there were tenants for 1800 apartment, leading to vacancy rate of ten percent and surplus of 200 apartments. The revenue at given rental rate was $1.8 million which was below the maximum possible dollar amount.
Shift in Supply and Demand
In scenario two of this simulation the shift in supply and demand has changed my decision from reducing the rental rate to increasing the rental rate as good life property management requested from local property managers to lease out the entire vacant apartments and in order to increase the revenue. As decision maker or local property manager I felt the best solution for this issue was to increase the rental price as it is always a positive incentive for supplier in this case “property manager” to cover overhead charges such as higher maintenance fee but due to lack of experience for decision maker the rate increased for rental was not sufficient to meet the corporate goals i.e. increasing the rental rate for two bed room apartment for month-to-month basis to $1100 per month was not a good business decision.
Key points
The main four points that this simulation consistently emphasized the concept of Demand and supply by breaking it down to four different factors.
Increase in population.
Change in preference.
Change in expectations.
Change in price.
Concept of simulation that can be applied in Work place
This simulation provided insight of how supply and demand has effects on business revenue. If supply of product is limited cost will be high and demand by consumers will not be very high. If the cost is low the demand for product will be very high. This term applies to business field that I am currently employed. This trend is very common, as cost of transportation of goods tend to be high during holiday season as it is the peak season for transportation business, where