Supply and Demand Simulation Essay
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The simulation of supply and demand for this assignment was using Atlantis apartment building rental showing a detailed analysis if how any changes to the rental availability can and will affect the manager decision on price and quality in the market. In this simulation you will see the analysis point out the effect of supply and demand and how it can and needs to reestablishment of price equilibrium. Comparing the real world scenario to any supply and demand it will reveal main details of microeconomics and macroeconomics equilibrium, supply and demand shifts, also it will show the effects of elasticity in business pricing strategies.
There were a few microeconomics in the simulation. What microeconomics analyzes individual firm’s choices just as they relate to the whole economy basically influenced by any economics forces such as all the household buying decision (Colander, 2010). Now in the scenario where 2,500 apartments units are desiring to have a certain amount for each unit for rent to make it full capacity, the price consumers are even willing to pay the consideration cost of the apartment cost.
The consideration shows just how consumers make decisions that will contribute to supply and demand which will illustrates a microeconomic concept. In some cases there are some company that would look at certain ways to increase their production so that they can decrease their prices compared to their competitors in a way this could help adjust the equilibrium prices. Allowing the company to pass price saving to any consumers. Macroeconomics
Macroeconomics looks at the aggregate that needs to be determined how breaking down individual components influences the economy which considering inflation, unemployment, business cycles, and growth (Colander, 2010). Macroeconomics is mostly used when the economy changes such as with inflation. The one thing that can be a problem or even not one is when inflation would cause a company to have an increase cost of materials in any producing their products. Now this can either be a good thing or a bad thing depending on the company such as these apartments. Thus having the company to pass the new equilibrium to consumers. This may help with creating a change in quantity to be provided as supply that has to be adjusted to even meet the decrease of demand due to the economy equilibrium price. Price Elasticity of Demand
This simulation also go over the importance of price elasticity of demand. Now this concept shows the level of any changes in demand when the prices change. Example a product with many substitutes cause consumers to purchase the products that happens to have a lower price in the end it resulted in having a high price elasticity price. Now however if there are any few substitutes then consumers will pay a premium for the products if they can use the price points lowering the elasticity price. In this simulation I found that the prices for the elasticity was relatively high. When things was done to improve the price there was an occurrence in the price. Demand is the one thing that can either decrease or increase based on price of a product or service (Colander, 2010). There may be consumers who tend to even buy products that were at their decrease price (Colander, 2010). What needs to happen is that companies need to initiate discounts to a consumer to increase demand.
As you are doing this simulation Susan recommended a vacancy rate of 15% choosing to lower way more with the vacancy rate of 5% and it was successful in maximizing revenue at $1.81 million which is a good profit. But in order to work with rate you first have to deal with the falling and raising of demand and maintain balance with any of the equilibrium price and focus on the intersection supply and demand curve. However with the price ceiling there was a limited number of apartments at the predetermined price that could be offer at a lower rate. In summary the Supply and Demand simulation provided the understanding to many different ways and concepts. Understanding the way microeconomics and macroeconomics was obtained by showing different scenarios in the simulation to complete and answering the question that it asked to change the price or the demand in apartment. Knowing that microeconomics can be used on a smaller scale while the macroeconomics focus on the economy as a whole. After the simulation was completed I was able to use and understand the concept in a real world experience and be a wiser consumer and offer my knowledge to the company that I currently work for and see if we can use any of the information that I have learned and see if it works with us.
Colander, D.C. (2010). Economics (8th ed.) New York: McGraw –Hill University of Phoenix – Supply and Demand simulation