Supply and Demand Simulation

Topics: Supply and demand, Elasticity, Price elasticity of demand Pages: 2 (650 words) Published: January 26, 2011
Running Header: Supply and Demand

Supply and Demand Simulation Paper
Bobbi Siddoway
University of Phoenix

Supply and Demand Simulation Paper
Supply and demand is the common sense principle which defines the generally observed relationship between demand, supply and prices: as demand increases the price goes up which attracts new suppliers who increase the supply bringing the price back to normal (Law of Supply and Demand, 2010). A surplus in the market exerts a downward pressure on price while a shortage in the market exerts an upward pressure on price.

In the supply and demand simulation Goodlife has control of the apartment rental community is Atlantis. In the first year Goodlife wants to bring down the vacancy rate to about 15 percent while maximizing revenue. Goodlife must lower the cost of rent in order to lower the vacancy rate but they have to make sure they don’t lower it too much or they will decrease their revenue so they must find at what rental rate they will lower vacancy but no lose revenue. As the years go by several things affect the supply and demand of the Goodlife Company, population increase, individuals wanting long-term housing and a price ceiling. Shifts in supply and demand affect decision making by causing the company to look at how to get the greatest revenue with the changes.

The supply and demand simulation went over several key points that were also part of our textbook reading such as total revenue and demand, individual and market demand, cross price elasticity and shifting supply and demand. Total revenue and demand is the ability for a company to tell whether the total revenue will go up or down when they raise or lower their prices (Colander, 2008). Individual and market demand refers to how individuals may stop buying a product due to a slight rise in cost, the market demand is influenced both by how many people drop out totally and by how much an existing consumer marginally changes his or her quantity...
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