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Supply and Demand Simulation Paper

Essay by   •  March 30, 2011  •  Essay  •  723 Words (3 Pages)  •  1,866 Views

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Supply and Demand Simulation

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

Factors that affect supply and demand in the simulation are driven by the availability of the rental apartments, the demand for the rentals, the number of available renters, and the price. According to the simulation, a demand curve is downward sloping. In the simulation, as the price decreased, demand increased. The supply curve, on the other hand, is upward sloping. The quantity of two-bedroom apartments increased as the price increased. A surplus in the market for the apartments exerts downward pressure on the price. This means to attract the possible renters, GoodLife would need to lower prices. On the other hand, a shortage in the number of available apartments exerts an upward pressure on the price. To maintain the balance of quantity demanded and the quantity supplied, GoodLife would need to raise the prices.

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

Shifts in supply and demand in the simulation were caused by several factors. Changes in the direction of GoodLife Management and the population changes within Atlantis and outlying areas had an affect on supply and demand in the simulation. Changes in the preference of the tenants caused the demand for the apartments to decrease. GoodLife Management began converting the rental apartments into condominiums that were for sell, causing a decrease in the supply at the same time as the decrease in demand. Because of this, the supply curve and the demand curve both shifted to the left.

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

Four key points in the simulation were supply and demand, equilibrium, shifts in the supply and demand, and price ceilings. The simulation is based on supply and demand and is very helpful in understanding the different factors that can affect it. Equilibrium is when the quantity demanded equals the quantity supplied. The simulation showed if prices were below equilibrium, the quantity of apartments demanded exceeded the quantity available and caused a shortage in the number of available apartments. This affect also causes the price of the rental apartment to increase. If prices were above equilibrium, the opposite would happen. There would be a surplus of available apartments and would drive the price down. Shifts in supply and demand in the simulation were illustrated by different factors causing supply and demand to decrease at the same time.

Price ceilings can cause problems in the equilibrium between supply and demand. If the price for the rental apartments was at the ceiling price, and the demand

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