Supply Demand Supply and Demand

Supply Demand

Supply and Demand Simulation

What causes the changes in supply and demand in the simulation?

Supply and demand changes are instigated in the simulation by changes in pricing. The rate charged per two bedroom apartment unit per month is both used in order to address issues of fluctuating demand and to respond to indices of too great or too low a supply on the market.

How do shifts in supply and demand affect your decision making?

It is the case in some instances that shifts in the market are produced by external factors. For instance, in the simulation, we find that an expansion of the GoodLife's business with respect to the positive growth of the city of Atlantis may produce an increase in demand. This increase in demand may stimulate the GoodLife to make the decision to raise its monthly rates. This in turn will have an impact on how the supply is viewed by the target renting demographics.

c. List four key points from the reading assignments that were emphasized in the simulation.

1.

The Supply Curve is discussed in the simulation and denotes that the company which is attaining its market share through higher prices will be willing to increase the supply on the market. With respect to apartment units in the simulation, there is an upward sloping supply curve which dictates that with an increase in the rental rate, the number of apartments supplied increases. In this case, working to lease all 2500 available apartment units would be dictated by a monthly rate of $1,550 per unit.

2.

The Demand Curve is also implicated in the simulation, particularly where we find that the cost of rentals at $1,550 far overshoots the demand on the market. The Demand Curve moves inversely to the Supply Cure and in this case produces a demand for only 1000 apartments in a market where 2500 are available. This surplus of 1500 apartments denotes that the demand curve calls for a reduction in pricing.

3.

This denotes the concept of Equilibrium, a balance which is required between pricing and availability in order to the bring the Supply and Demand Curves into closer correspondence to one another. In this case, the Equilibrium proves to be $1,050 per unit per month.

4.

Price Ceiling

The use of a Price Ceiling such as occurs when Atlantis adopts rent control helps to temper costs of rental so as to address demand. This means that the demand increase will produce an increase in supply at a controlled rate.

d. How can you apply what you learned about the concepts of supply and demand from the simulation to your workplace?

The simulation sheds particular light on the idea of adjusting pricing structure according to apparent market demand. This is useful to any workplace. In my case, the notion that large-scale external changes in the marketplace might bring about the need to make internal decisions within an organization seem particularly applicable. The simulation describes a scenario in which a company called Lintech makes its new home in Atlantis, bringing with it a boom in residency. The importance for a company such as Goodlife of preempting this infusion by increasing both price and supply is tantamount to accommodating rising demand. This is a scenario which applies to any organizational decision-making scheme predicated by market behaviors.

e. Determine how price elasticity of demand affects the decision making of the consumer and of the organization.

Using the simulation in question, we can see that there is a direct relationship between the apparent market demand and the decisions made an organization. For GoodLife, for instance, the company imperative to reach a vacancy rate that tops out at 18% denotes that price adjustments must be made. Here, the ability to engage price elasticity according to market demand will produce and improvement in revenues for the company on the whole. Using the simulation provided, we can observe that with two-bedroom apartment building rentals going for $11.75 per month, the vacancy rate initiates at about 27.5% and brings in an annual revenue of roughly $1.7 million.