Supply and Demand Simulation: Project Atlantis

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Supply and demand simulation: Project Atlantis The supply and demand simulation was a simulation of GoodLife Management, a property management firm controlling all of the seven apartment complexes in the city of Atlantis. For the 9 year period in the simulation the housing market had many ups and downs because of businesses moving into the area bringing an increased amount of jobs, the change in consumer preferences and company expectations, and the policy changes induced from the government.
What causes changes in supply and demand in the simulation? In year one GoodLife Management wanted to fill the apartments with a less than 15 percent vacancy rate while gaining the most possible revenue. They did this by lowering prices to $950 rent per month on their apartments. The lower price increased demand for the apartments and GoodLife filled 1900 apartments with a surplus of only 100 apartments leaving a vacancy of only 5 percent. Lintech Inc. and other companies came into Atlantis and increased the population in the city. When the new companies moved in it created a increase in demand, shifting the curve to the right, this gave GoodLife the incentive to rent out more apartments because a higher equilibrium price is accomplished. During year 7 consumers preferred detached homes to apartments so it provided a shift to the left in the demand curve and created a surplus in apartments and GoodLife had to lower their rental rates to keep up with the competition. The shift in demand moved the supply down to reach another equilibrium at 2,250 apartments rented at $1300 per month. Midway through year 7 GoodLife converted several hundred apartments into condos for sale to keep up with the market demands and consumer change in preference. This caused a shift in both the supply and demand curves because consumers preferred detached homes and the company expected condos to be the best substitute for those detached homes. In July of year 7 1,900 apartments were

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