Microeconomics and the Laws of Supply and Demand

Microeconomics and the Laws of Supply and Demand

Economics is the study of how the worlds buying and selling works. Without Economics, We would not be able to make sense of any type of transaction that takes place in the world. Supply and Demand are the basis of economics and they go hand in hand. Without a supply there can be no demand and without a demand, there is no supply. There are two types of studies of economics: Macroeconomics and Microeconomics, We will explore both in this paper.

Macroeconomics VS. Microeconomics

According to Investopedia.com; Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies.

In the simulation, when it was decided that rent would be lowered due to the lessened demand, that was microeconomics. When it was decided that people had more money to spend on single houses due to a new business opening, that’s when the prices of the houses went up, that was macroeconomics. The supply curve shifted to the left because the supply (amounts of apartments for rent) grew once rent was raised. The demand curve shifted to the right because there were more apartments demanded after rent was reduced.

Each of the changes in shift had an effect on the equilibrium of price and quantity and the customers. The demand curve is mainly affected by the customer’s behaviors and circumstances. The supply shift has very little to do with customer behavior.

I have witnessed supply and demand work in my home. For example, when there is too much cereal, No one really wants it, however when there isn’t very much cereal, that’s when everyone wants a bowl. When my mom does