ECO365 Week 2 Simulation Essay
ECO365 Week 2 Simulation
The supply and demand factors are essential to the work of economics. The use of these demand curves help businesses to maximize profits and the supply curve depicts the best price for the most product. These statistics are shown on a graph, which changes according to the supply and demand in a particular market (Colander, 2010). This simulation is an example of Good life property apartment rental supply and demand.
This paper will discuss two microeconomics and two macroeconomics principles or concepts from the simulation. Also it will identify at least one shift of the supply curve and one shift of the demand curve in the simulation. In addition, it will discuss the effects of supply and demand in the workplace. Last, Relating to the simulation, it will explain how the price elasticity of demand affects a consumer’s purchasing and the firm’s pricing strategy. Two microeconomics and two macroeconomics principles
Within this simulation are multiple examples of microeconomics and macroeconomics. One example of microeconomics is Good life property raising or lowering its rental rate for the apartments. Because it is a business decision, it falls under microeconomics. Another example is the percentage of inventory that Good Life has allotted for rental of their inventory.
Macroeconomics deals more with decisions made higher than the business itself. For example, the increase of income caused by the addition of Lintech, is macroeconomics. Also the government imposing a cap on the monthly rent of 1550 dollars for two-bedroom apartments is a macroeconomic decision.
One shift of the supply curve and one shift of the demand curve The supply curve is represented by a gradually increasing line on the graph of the scenario. The line represents the price and quantity for which apartments are purchased. For example, a shift in the supply curve was witnessed when the new business entered the area.
The addition of Lintech working facility prompted more consumers to want apartments. The supply curve moved left to indicate less supply on hand. The downward slope on the graph represents the demand curve. As recently explained, the price and demand are captured on this line. The increase of rent caused the demand curve to shift to the left, indicating a decrease in demand (Colander, 2010). Effects of supply and demand in the workplace
In the petroleum industry, the price is relatively elastic. The demand of work from day-to-day is determined by the consumers demand for that product. Some days will require 12 hours of service whereas others will require eight hours of service to complete customer deliveries. With respect to supply, a shortage would negatively affect companies that are already customers. The shortage may increase price temporarily or an increase in the general cost of oil may increase price long term.
The idea behind macro and microeconomics help to understand the impact that supply and demand have on the economy. Companies make educated decisions on a products life cycle according to the demand for that item. The equilibrium point (the intersecting point on supply and demand) is best suited for a product or service.
How the price elasticity of demand affects a consumer’s purchasing and the firm’s pricing strategy The elasticity of price affects a company’s price tactics and consumer purchasing actions. If a products price changes, customer purchasing habits may rise or fall accordingly (Colander, 2010). If the demand for a particular apartment increases, as seen in the scenario, Good life properties will be able to raise rent rates in order to capitalize on the higher demand.
On the other hand, customers may not purchase as much with a higher rent rate. As a result of increased rates, customers may seek alternatives such as conventional homes. This is how price elasticity effects consumer purchasing and the price point set by companies. The price for items or services may be too high which would cripple the potential earnings. A look at the supply and demand charts depicts the best price point.
Good life property management have maximized its earnings and optimized its rental rates by using the supply and demand curves. Considering the petroleum industry, supply, and demand directly affect the price. Price elasticity is also a factor to consider when setting the price for services or products.
Colander, D. C. (2010). Economics (8th ed.). New York, NY: McGraw-Hill. Retrieved April 11, 2013 from The University of Phoenix eBook Collection database.