Laws of Supply and Demand

Topics: Supply and demand, Renting, Elasticity Pages: 9 (1290 words) Published: August 21, 2014


Laws of Supply and Demand
Derrick Laron Gibson
ECO/365
August 7, 2014
University of Phoenix
Laws of Supply and Demand
Your author has been given the responsibility of completing the demand and supply simulation and then discussing his thoughts on several questions presented before him. These questions deal heavily on microeconomics and macroeconomics with regards to managing approximately 3000 two bedroom apartments and their rentals. Your author will now address the questions as they were presented before him. Identify two microeconomics and two macroeconomics principles or concepts from the simulation. To begin, your author feels compelled to first give a brief description of what macroeconomics and microeconomics entails. Macroeconomics is simply a part of economics that focuses on big scale economic factors on city, state or country levels. These factors can range from interest rates to national productivity. Two concepts from the simulation that were founded as macroeconomics are the price cap of $1550 imposed by the Government in year nine and the internal decision to get the vacancy rate down to 15% in year one. Microeconomics is mostly concerned with small scale factors that effects an individual’s decisions. These decisions can range from where to live or what products to buy based on the individuals financial situation. Two concepts from the simulation that were chosen as microeconomics by your author are as follows. The first is the entry of Lintech and increased population of Atlantis that followed Lintech for occupational purposes. The second is the increased incomes of individuals working for Lintech and their desire to purchase detached homes as opposed to renting apartments. Explain why you have categorized these principles or concepts as microeconomics or macroeconomics. The price cap of $1550 imposed by the Government and the decision to get vacancy rates down to 15% are both large scale factors. Vacancies reduced to 15% on all two bedroom apartments in a city monopolized by one entity in charge of all two bedroom apartment rentals will have a large impact on the economics of Atlantis and is therefore macroeconomics. Any action imposed by Government will have large scale affects and is therefore macroeconomics.

Individuals deciding to follow an occupational resource to another location in order to secure said occupation and then residing in this location is microeconomics. This is a decision made on an individual bases. Likewise, these same individuals receiving increased pay from their new occupation and then choosing detached homes over two bedroom apartments as their residence is also an individual choice and microeconomics. Identify at least one shift of the supply curve and one shift of the demand curve in the simulation. One shift in the supply curve is from the Government imposing the $1550 cap of two bedroom apartment rentals in Atlantis. One shift in the demand curve is GoodLife choosing to sell 400 rentals as condominiums and then choosing to convert even more rentals to condiminiums. What causes the shifts? The shift in the supply curve was caused by the Government imposing the $1550 rental cap and GoodLife deciding they could not make a profit by renting all their apartments at that capped price, thus the supply of their apartments was decreased in order for their apartment rentals to remain viable to the company. The shift in the demand curve was caused when GoodLife decided to convert 400 plus apartments into condominiums for sale. By decreasing the number of apartments available for sale, demand was increased. For each shift, analyze how it would affect the equilibrium price, quantity, and decision making. The shift in the supply curve caused by the Governmental imposed $1550 rental cap caused decisions to be made on the basis of profitability regarding renting units at a maximum of $1550. The decision made by GoodLife was that they could not rent...


References: Rodrigo, G. C. (n.d.). Micro and Macro: The Economic Divide. Retrieved from http://www.imf.org/external/pubs/ft/fandd/basics/bigsmall.htm
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