Supply And Demand Simulation
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Supply and Demand Simulation
The first change in supply and demand is when the zero percent vacancy rates are explored on a temporary month-to-month lease for two-bedroom apartments. The result of this change was 2500 two-bedroom apartments rented at a rate of $1550, which is higher than the previous rate of $1100 with 15% vacancy rate. A shortage of two-bedroom apartments was created and the market exerted upward pressure on the rental rate. Another reason for change was the neighboring communities have much lower rental rates and the rates needed to be lowered to compete. The third reason for a change was the news of Lintech moving their offices to Atlantis. The rental rates on every vacant and temporary, month-to-month lease renewals will be increased because of the demand. This change did not affect the supply apartments, but the demand increased causing the demand curve to shift to the right as displayed in Graph 1-1.
Graph 1-1
Graph 1-2
A change in housing preferences caused a shift from two-bedroom apartments to occupant owned detached homes. This change caused a decrease in the demand of two-bedroom apartments and the demand curve shift to the left as displayed in Graph 1-2. Once again, the supply of apartments is not impacted. The result is a temporary surplus of apartments at the previous equilibrium rental rate of $1550. However, Goodlife has confronted the decrease and future decreases by converting two-bedroom apartments to occupant owned condos. This solves two problems; the surplus of two-bedroom apartments and the decreasing demand for them by supply the demanded housing while reducing the surplus. The reduction of two-bedroom apartments on the market creates a shortage that pushes rental rates upwards as seen in Graph 1-3. The shifts in supply and demand can affect decision making on multiple levels. Decision makers need to understand when price needs to be adjusted to account for the increasing or decreasing demand.
Graph 1.3