Supply and demand simulation: microeconomic and macroeconomic principles

Microeconomic and Macroeconomic Principles

The simulation is based on Atlantis housing and looks at the general conditions that prevail and determine the housing conditions, demand and the prices therefore. There are both detached homes and apartments that are to let and to be bought in this region. The simulation and hence the paper concentrates on the supply and demand of two bedroom apartments in Atlantis.

One of the microeconomic factors is the demand and supply. With 2,000 two-bedroom apartments within the management of Hal Morgan, they are able to meet the high demand that could be. This makes them have an advantage over their competitors within the same market niche that may not have the same high numbers of rooms. The other microeconomic factor that works to the advantage of Goodlife Management over the possible competition is the monopoly that they have in this region in the sector of two-bedroomed apartments.

One of the macroeconomic conditions that contribute to the prices of houses in the region is the serene surrounding that presents no traffic concentration and low pollution, well maintained sidewalks for jogging, extensive open spaces and the general good condition of the properties in the region. The other macroeconomic factor is the government regulation that introduced the ceiling prices for rental apartments. This is a factor that is beyond the control of the management firm hence they consequently have to make adjustments to ensure their business stands stable still.

There is a shift in the demand curve since as seen in the rental rates vs. The number of apartments graph, which is basically the demand graph indicates an increase in the quantity of houses demanded with every decrease in price and a consequent increase in revenue until the optimum point is reached where quantity demanded stands at 2,000 houses and beyond this there can never be meaningful revenue gathered again. There can also be a maximum supply at the rate of $1,550 where 2,500 apartments will be rented out on a month-to-month basis with all the maintenance costs covered. According to the supply curve, there is likely to be a drop in the demand of these apartments if the prices went beyond $1,550.

In this case however, for there to be an equilibrium between the supply and the demand trend or curve, there will be need to lower the monthly rent from $1,550 to $1,050 so that there can be a balance between the demand and supply of the houses at all times around the year. This means that at any given time, the demand for the houses will not be below the supply provided and that the company will not at any time supply more apartments than the potential tenants. There is no shortage or surplus hence no need for incentives for the rental rates nor for the number of apartments to have a change in number supplied.

When the supply curve is sloping upwards, then the supply increases with the increase in price, that is more of the commodity is supplied with the increase in price. On the other hand, when the demand curve is downward sloping, then the demand increases with the decrease in price hence the company could make a decision to increase the demand by reducing the prices.

The demand and supply curve, as well as the shifts in the demand of goods and the possibility of having a ceiling price, has been well handled in the simulation and clear means of responding to each of the conditions as they may present themselves. In my daily sales of fruits, there is bound to be demand and supply trends which I know how to deal with, but one aspect that I have come to learn here is the handling of the shifts in demand especially when other fruits come into market during a season yet I do not deal in those fruits.

The microeconomic factors as expressed in the simulation like the price, supply and demand as well as the macroeconomic factors like the government regulations that ay introduce ceilings in prices often affect the market trends hence there is need to know how to respond to such adjustments and effects that may be there within the market.