Goodlife Management: Supply and Demand Simulation

Goodlife Management: Supply and Demand Simulation

Lydia Grathree

ECO/415

September 26, 2011

Blake Bennett - Facilitator

Goodlife Management: Supply and Demand Simulation

What is demand curve, what is the supply curve? What is equilibrium when it comes to the business world? The sumulation about supply and demand for Goodlife Management gives some valuable insight and explanations on how different factors effect demand, supply and equilibrium within a business. The following essay will try and answer these questions and others, but first a quick overview of the situation.

Overview

The sumulation is about Goodlife Management, a property management company in Atlantis. Goodlife is the only apartment management company in Atlantis and its only competition is Oakridge Builders who deal in rentals of detached homes. The cost of the homes are higher than those of the apartments with the added benefit that tenets do not have to do their own maintenance. Because Goodlife has a monopoly on the apartment rentals in the area it is important that they decide on monthy rates that will give the the best occupancy rate, and also bring in the most profit. Using their two bedroom apartments the sumulation goes through different senerials to help answer supply and demand questions, and the effect the answers management choose as well as the affect they will have on the company's future.

Questions to answer

The demand curve is an imaginary line that tells the qualities consumers would demand at various prices of a product. Remember the more quanity is demanded at a lower price. This curve is a downward slop which increases as the price decreases. The supply curve is oposite it is an upward slop which means supply increases with the increase of price. This imaginary line tells the quanities producters are able and willing to sell at various prices. Equilibrium means no shortage and no surplus. In other words when demand equals supply you have equilibrium, when demand exceeds supply you are below equilibrium, and when supply exceeds demand you are above equilibrium.

How do changes in the business environment cause changes in supply and demand? Changes like businesses openings or closing, expantions, schools, and even new entertainment venues can have both a positive and a negitive effect on changes in supply and demand. One business environmental change in the simulation was when Lintech Inc moves to town. Lintech Inc has been growing steadily and is expanding, putting its hub in Atlantis. That means Atlantis' population is going to grow and with that growth a higher demand for housing. In response to this demand the price of the apartments will increase because the demand for housing has increase but the supply has not.

Another business enviromental change is when the population of Atlantis's income increases following more businesses coming to town behind Lintech, they can now afford those detached homes that they could not afford before. In response to this decrease in demand the prices will decrease. The people of Atlantis's are no longer interested in apartments they want homes and because Goodlife does not have that supply the demand for their product is decreasing.

Why is marginal analysis used when making business decisions? According to O'Flynn (2011) "Marginal analysis is useful to highlight managerial issues and decision making. A company can use marginal analysis to evaluate models. Management can use marginal analysis to track operating profit margins and to see what is driving performance. Companies can also use marginal analysis to determine break-even sales. Marginal analysis is a good tool for companies to use to make decisions on improving performance." In the simulation marginal analysis helped make the