Microeconomics and the Laws of Supply and Demand

Microeconomics and the Laws of Supply and Demand

Introduction

An assortment of factors persuades supply and demand. These factors include both price increases as well as decreases. For instance, if there is a nominal decrease in a rental asking price that can result in a considerable increase in the housing demand. Likewise, an increase in a two-bedroom rental apartment's price inevitably resulted in a decreased demand for houses considerably. In the scenario, suppliers were more disposed to supply a greater number of houses at higher prices and fewer one at reduced rental costs.

Macroeconomic and Microeconomic Principles

Examining macroeconomics, its focus is on factors affecting the economy as a whole (Colander, 2013, Chapter 1). With the Lintech Company, they introduced and displayed changes to Atlantis and the financial situation of Goodlife Management firm. The firm observed increases in residential demands due to worker relocations to the area. The firm increased rental prices due to higher demands; apartments became overly priced, motivating government to place pricing caps of $1,550 on rental units. Caps controlled rental prices, preventing Goodlife from gauging consumers with skyrocketing prices. Factors of macroeconomics can cause supply and demand curves to shift and cause significant impacts on equilibrium pricing as well as on the quantity of available apartments. The concept of microeconomics exhibited was much more efficient and ideal. Reaching the maximum revenue and determining price by adding costs of maintenance revamped the rental rate.

Shifts in Supply and Demand Curves

There was a rise in Atlantis’s population, which directed a higher housing demand and caused rental prices to rise. This occurrence happens when the demand for commodities exceeds the supply available. Thus, suppliers were willing to construct additional units at increased rates. When the population dwindled, the housing demand fell and remaining, available rentals were leased at lower prices.

Substitutes have an effect on supply and demand of a commodity. Several residences within Atlantis owned homes in the suburbs since renting homes within Atlantis was found unnecessary. When demand for homes declined, it forced suppliers to reduce their supply and/or rental fees. To further attract clients to increase capital, pricing can fluctuate in either direction. Consumer preferences affect supply and demand of commodities. When there is a shift in consumer trend from needing a smaller apartment to a larger home, the demand for apartments weakened and housing demands were amplified. Suppliers increased construction on homes to accommodate needs of prospective consumers.

Under the free market conditions, when there is a negative shift in demand it results