Supply and Demand Are Two Microeconomic Concepts in the Simulation

Supply and demand are two microeconomic concepts in the simulation. The supply would be the apartments that GoodLife offered, and the demand would be how many were wanted by consumers. I have placed these two concepts under microeconomics because they deal directly with the goods and services talked about. Two concepts of macroeconomics that are shown in the simulation are the affects of short and long-term fluctuations. These are placed under macroeconomics because they deal directly with the overall market, not anything individual.

The demand curve is downward sloping, and that quantity demanded increases as the price decreases- that is when you move down the curve. GoodLife could increase the quantity demanded of its rented apartments only be reducing the rental rate. The supply curve is upward sloping and quantity supplied increases with an increase in price- that is, as you move up the supply curve. An increase in rental rate would cause GoodLife to lease out more apartments.

Quantity demanded equals quantity supplied only at the equilibrium point. At prices below equilibrium, the quantity demanded exceeds quantity supplied, and there is a shortage in the market. That is, consumers are willing to buy more than producers are willing to sell at this price. This causes price to increase. As price increases, quantity decreases and quantity supplied increases. This adjustment process continues until equilibrium is attained. Similarly, at prices above equilibrium, quantity supplied exceeds quantity demanded, and there is a surplus in the market. Producers are willing to sell more than consumers are willing to buy, which exerts a downward pressure on price. The price continues to decrease until equilibrium is attained.

Demand and supply are not static; various factors cause them to increase or decrease. For instance, an increase in population caused demand for GoodLife's two-bedroom apartments to increase, but a change in preferences caused demand to decrease. Similarly, a change in expectations caused supply of two-bedroom apartments to decrease. These factors cause the demand or supply curve to shift to the right or left. A change in price, on the other hand, causes upward or downward movement along the same demand or supply curve.

A price ceiling below equilibrium causes shortages because at this price, consumers' quantity demanded exceeds producers' quantity supplied. In such a scenario, non-price methods of rationing the limited supply of two-bedroom apartments may come into the picture.

After learning more about supply and demand from the simulation, this concept is easy for me to understand. For example, when it comes to gas prices, supply and demand is very important. When the quantity of gas demanded increases the price decreases, allowing for cheaper gas prices. When more people fill up at the pump, the price of gas at the station tends to lower. But, on the contrary, when the quantity