Supply and Demand Simulation

Topics: Supply and demand, Economic equilibrium, Renting Pages: 4 (1195 words) Published: March 31, 2008
Supply and Demand Simulation Summary

University of Phoenix

ECO360, Economics for Business I

The Supply/Demand simulation involves acting as property manager for GoodLife Management in the fictional town of Atlantis. GoodLife Management manages seven apartment complexes in Atlantis. The property manager is expected to adjust the monthly rental rate of two-bed rental apartments and the quantity of apartments supplied based on the market trends. Factors that influence the supply and demand for apartments include personal preferences, economy, income, and rental rates. Each of these factors affect the ratio of vacant and occupied apartments. Decisions regarding supply, demand, and price require careful evaluation. Regular monitoring of supply and demand is necessary to remain competitive in a crowded rental market. As the community grows, GoodLife must make adjustments to remain viable in the real estate industry. The objective of the first simulation was to determine the monthly rental rate for two-bedroom apartments on temporary leases. The vacancy rate had to be decreased to less than 15% while maximizing revenue. As the rental rate of the apartments was decreased, demand increased, resulting in a lower vacancy rate. The simulation stressed that as the rental rate is lowered revenue initially increases, reaching a maximum at a particular rental rate. Demand then decreases. The key is to determine at what level the rental rate offers the highest possible revenue with a low vacancy rate. The next portion of the simulation introduced the concept of the supply curve to demonstrate the price required to lease all the available apartments. When the rental rate was increased, more two-bedroom apartments were supplied. As stated in Macroeconomics:” Quantity supplied rises as price rises, other things constant” (Colander, 2004). This illustrates that the supply curve has an upward slope. The third portion of the simulation required the property...
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