Basic Concepts Paper
October 19, 2012
Basic Concepts Paper
Circumstances, which are different, can have a major affect on supply and demand. The simulation in this week’s assignment deals with the curves of supply and demand and how they are affected by the changing of situations that happens in the city of Atlantis with the two-bedroom apartments. Changes were supposed to be made depending on the findings and results made within the Atlantis community. The shifts in supply and demand will have an effect on the Goodlife decisions. This simulation has four emphasized key points they are price ceilings, supply and demand, shifts in supply and ...view middle of the document...
The lower prices of the apartment cause the supplier to be skeptical about providing the apartments because of the upkeep. Renting the apartments at a cheaper price does not change the maintaining costs for the apartments, and the suppliers are losing money so he or she tends to want to stop supplying the goods.
Marginal analysis is a technique used in microeconomics where small changes in specific variables are studied and compared to other variables and the complete system (investorwords.com, 2010). The marginal analysis weighs options to see how the outcome of supply and demand changes when supply and demand increases or decreases when business and revenue areas lower are rise. The outcome of marginal analysis allows a business to see what it will gain by losing in other areas of the business. In the simulation the company allowed a bunch of apartments to be sold at a higher cost, yet once the rates were decreased, the prices attracted more tenants. A decision made by a company to change the cost of a product solely depends on the marginal cost and revenue resulting changes. A price change should occur if marginal revenue has a greater value than marginal cost. An example of marginal analysis was that the Atlantis City Council incorporated a rental control for the apartments. The regulation, which was new, had a direct effect on the price the management could charge for his or her apartments.
To determine appropriate output levels in this simulation the team did a shortfall analysis. In this analysis my team took an evaluation of the between variances and planned performance. This helped the team determine the root cause of the deficiencies in the anticipated outputs. The team wanted the supply and demand to become equal, and the company decided to decrease the amount of rent to $1,050 dollars, when this happened a surplus in the market was available causing a downward price pressure while leaving a shortage in the market. The analysis produced two documents one is about problems, and the second provides valuable insights that will allow better decisions to be made, which will allow performance of undesirable deviations. One example was that the price ceiling went into effect, which caused the rate not to increase or decrease. The team’s decisions were successful in some aspects and not so successful in other situations. In the simulation some of the team decisions led to financial success by selling each apartment at the appropriate price; whereas, this allowed everyone to win and make a profit. Some mistakes that the team made in the simulation was trying to make an affordable apartment rent for the tenants. When this decision was made the apartment management lost money by selling the places so cheap, and the management team had more tenants than apartments. The price lessoned so more people wanted to move in and there were no vacancies.
The company had some fixed and variable...