Basic Concepts: Supply and Demand

Basic Concepts: Supply and Demand

Supply and Demand Concepts Simulation:

The Applying Supply and Demand Concepts Simulation on the University of Phoenix website is an example that explains how economics can be applied in business. As with most economical problems in business, this simulation revolves around achieving and sustaining the equilibrium point of the dual bedroom rental market. The property manager of GLM (Good Life Management) based in Atlantis, analyzes the supply and demand of rental apartments. The demand for rentals depends on the following: city population, rental apartment pricing, and customer preference. The supply depends on the amount of apartments and vacated versus occupied apartments. Issues are displayed in the simulation such as supply and demand shifts and other economic obstacles affecting internal and external business environments. Issues addressed in the simulation are dealt with marginal analysis and cost versus output levels.

Supply and Demand Curve Shifts:

Factors such as population, customer preference, and apartment vacancy affect the supply and demand curves. GLM's nine-year market operation affected the company's organizational structure and the project manager uses new decision-making processes to battle the supply and demand issues that arise.

One variable that affected the demand of Good Life Management was the consumer predilection. The property manager of Good Life Management transformed the two-bedroom rental markets into condominiums. The property manager did not have enough funds to convert all of the apartments, thus the supply of condominiums decreased and the demand shifted to the left along with supply of condominiums.

Income and price are other obsticals of demand as well as customer preference. The sellers, vacancy, and prices affect the supply curve. Supplementary variables shift the curves left and right depending on the variable. In years five and seven of the simulation, the supply and demand curves shift. The introduction of a new company into Atlantis causes more competition for GLM and a population increase shifts the demand curve. In the seventh year, consumer interest changes and customers prefer buying houses rather than renting apartments. Customer preference changes throughout the year causing extreme demand shifts. Because of this, the property manager forecasts fewer customers, thus vacating and creating fewer apartments.

Later in the years, the demand for apartments increased as the leasing prices plumeted. Because of this shift, the supply curve inclines. A shift in the demand and supply curve resulted in an increase in the supply of apartments and a rise in prices. Such constant shifting would make the market either far above or below equilibrium. The rental rate is under constant variance as the apartment vacancy shifts up and down. To reach equilibrium, it is necessary for GLM to increase the rental price and remove some apartments.

Marginal Analysis of Good Life Management Economics:

Supply and demand shifts changed the organizational structure and decision-making strategies of GLM. Specific actions were taken at each shift of supply or demand. Increase in demand results in rental price increase and decrease in demand results in rental price decrease. Price ceiling, or an appendage of a stipend, is a form