Analyzing Supply and Demand in the Housing Market

Working through the simulation in our week 2 studies was a focus on supply and demand and how it would relate to the housing market in the city of Atlantis. Working as a property manager of Goodlife Management, overseeing properties and making the right decisions in order to make sure that the apartments rent and at the appropriate costs with the new scenarios that were given were not easy. I personally had to revisit the site several times just to grasp the concepts and why my choices were not working out for the plan that the simulation was giving.

Two microeconomics concepts that were present in the simulation was supply and demand. Demand is summarizes as the need or want of a product with the means to pay for it. Supply is summarized as the amount of a good that is available to purchase. In the first scenario we were asked to lower the vacancy rate from 28% to 15% with maximizing revenue. I brought done the rental rate to $1050 and with that the quantity of apartments demanded was at 1700 units.

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This brought in a revenue range of $1.79 million with a surplus of 300 units still to rent.

According to the review, I did not meet the requested maximum revenue that could have resulted from the scenario. I was given information that if I lowered the rental rate and the vacancy rate I could have increased the revenue. The demand curve lets us know that the amounts people would demand at different prices. Recommendations for the remaining surplus of 300 units were to lower the rental price in order to meet the demand for the remaining units.

I see that the surplus was for in a real world situation for families that are lower income families than the average families renting at $1050. Within the scenario of balancing the demand of quantity to the quantity supplied I had to create the rental rate for the apartments to $1050 in order to balance out the curve. Since the market had competition in a neighboring town lowering the rental rate was able to balance out the supply and demand of the apartments. With this information being able to understand the markets tend to be competitive and in order to maximize optimal results we have to establish an equlibrium that would benefit the goal.

During a shift in the demand for detached homes instead of apartments the balance was to lower the price of the apartments in order to attract new renters. Lowering the rental rate to $1300 was attractive enough to bring in new renters away from those who are set in to rent detached townhomes. When there is a shortage in the market for apartments the shortage exerts an upward pressure on the price of the rentals and with that the demand curve and the supply curve shift to the left. Microeconomics is the study of individual choices and macroeconomics is the study of the economy as a whole. Learning about the shifts in demand and supply and how to maintain competitive prices is interesting and I understand more after the simulation on how each scenario has a different element that calls for a different demand. In the simulation, the renters of Atlantis had their choice of staying in town or venturing to neighboring towns in order to find the best choice for their money and that is how we operate daily.

We always look for the best deal and prices that are reasonable rather than outrageous. In my experience I see that luxury cars are able to maintain the higher prices that they carry because of the interest in the vehicles. The car makers know that only a certain amount of people can purchase the car and they keep their inventory low because of that. So when the demand is increasing for the vehicle, they can create a price that reflects the demand for the car and the willingness of the people to purchase the vehicle. This simulation helped me see other situations like that and make sense of why the prices are the way they are and what we as a consumer are to expect. In the real word, the housing market is in the buyers hands. There are numerous homes that are on the market and for a seller to sell, they are to give into the demands the buyers are requesting. The buyers are getting homes for less than listed and the sellers are losing out on a lot of their investments. When the market balances out with similar amounts of interest in buying and selling will we see equilibrium in prices and favorable outcomes for sellers.