Supply and Demand Simulation

Supply and Demand Simulation

Supply and demand is crucial concept in both macroeconomic and microeconomic settings. The week two simulation showed how a fictional apartment management company in the city of Atlantis is impacted by various economic factors. The microeconomic concepts can be categorized as changes in supply and demand and equilibrium, because these topics only affected the small apartment market in which the company operates. Macroeconomic concepts can be categorized as price elasticity and price ceilings because they have a broad impact on the overall region beyond the local apartment market.

The simulation showed that a shift in the supply curve or the demand curve could cause significant changes to the economic environment. For example, if the demand curve shifted to the left, it would show a decrease in demand from consumers and cause fewer apartments to be filled. This situation occurred in the simulation due to a widespread desire for property ownership and forced the management company to lower prices to compensate. The equilibrium price became lower because demand decreased, while supply and quantity remained consistent.

Similarly, if the supply curve were to shift to the right, it would indicate an increase in available apartments to rent. This situation could occur if the management company expanded the building to accommodate more units. Assuming there was no change in demand, the solution in this case would also be to lower prices to achieve full occupancy. However, this could be a very profitable decision if there was sufficient demand to fill the new quantity being supplied.

Ultimately, the company must make business decisions based on these economic factors to make sure their price and supply quantity are within realistic economic boundaries. If the apartments are not being rented in a timely manner, the most obvious solution is to make a price adjustment to meet the microeconomic supply and demand conditions. The simulation shows how failing to pay attention to economic conditions would prevent a company from operating at optimum efficiency. Throughout the simulation, the company had to react quickly to many opportunities and changes in the economic climate to ensure the highest possible price could be obtained on available apartments.

Macroeconomic factors can cause supply and demand shifts that have a large impact on equilibrium price and quantity. Price ceilings, which put a cap on the amount of rent that can be