Supply Demand Simulation Macro and Microeconomic Principles

Supply Demand Simulation

Macro and Microeconomic Principles

From the simulation, the two major microeconomic principles are supply and demand. The simulation majorly focuses on the supply and demand of rental properties in Atlantis. In addition, the influences on supply and demand form the major topic discussed in the simulation. The macroeconomic factors clearly stated in the simulation are changes in the population trend, choosing to rent or buy apartments and factors that directly influence these changes. Colander (2010), states that the quantity demanded always increases with falling prices and quantity supplied reduces with receding market prices (Colander, 2004). The company's supply is almost 2,000 apartments; the company speculates at reducing the vacancy rates to 15% to increase demand, a clear applicability of the demand law.

Demand and Supply Shifts

The availability of rental apartments, demand for rentals, number of potential renters and the pricing are the common factors that affect supply and demand from the simulation. From the simulation, the demand curve slopes downwards; rising prices decrease demand and vice versa. On the other hand, the supply curve slopes downwards; the quantity of apartments increases with price increases in Atlantis. In addition, higher number of apartments exerts pressure on pricing leading to lowering of prices and for GoodLife to have higher number of renters, they must reduce apartment prices. On the contrary, lower number of apartments will result in upward pressure on pricing and to gain a great market share and maintain equilibrium, the firm would be obliged to increase prices.

Effects of Shift in Supply and Demand

From the simulation, there are several factors that directly contributed to shifts in both supply and demand. Management changes in the firm as well as population changes within Atlantis locale contributed to shifts in demand and supply from the simulation (Mishkin, 2004). There was a reduction in the demand for the apartments due to changes in the tenants' preferences. By converting the rental apartments into condominiums for sale, GoodLife recorded negative deviations in both the demand and supply. Therefore, the supply as well as the demand curve shifted to the left.

Application of the Simulation

The writer of this paper works as a logistics manager with a multinational corporation with branches in several countries. This position requires that goods leave for the market at the speculated time with the right pricing, branding and their transportation is expected to be smooth without any flaws. This office requires a deep understanding of market movements such as demands and the quantity to be supplied to buyers. Applying the concepts learned in the simulation is an added advantage to this individual working in this department. The concepts learned from the simulation are vital in understanding the effects of supply and demand to the company.

Using Microeconomics to Understand Supply and Demand

In this simulation a reader can understand how supply and demand shifts happen and the causative factors. In addition, the writer of the simulation outlines how a firm meets the market equilibrium and factors that directly influence equilibrium. Prices below the equilibrium as portrayed in the simulation results in high demand for apartments, resulting in shortage of the number of apartments available for renting; the effect being price increases. In addition, the simulation enlightens readers that higher number of apartments would bring about low prices. It becomes easier to understand causes of shifts in supply and demand after reading the simulation.

Effects of Price Elasticity on Consumers

Supply and demand are vital economic concepts whereby product prices are positively or negatively influenced by the product's availability. Higher customer demands for any product in the market with a low supply would result in the increases in prices of that product. This may discourage customers from purchasing the product given the hiked pricing directly influenced by increased demands. High supply of products in the market would lead to reduction in prices a factor that is directly related to customer purchasing power. Low pricing caused by surplus good in the product would attract more number of consumers as opposed to few products selling expensively.