Supply and Demand Simulation
ECO/365 – Microeconomics
Atlantis is a great town to live in. There is especially a great opportunity in the rental real estate market and only one company to supply rental apartments. The key is to apply the laws of supply and demand to suit the needs of the business to be the most profitable.
Two Microeconomic and Macroeconomic Principles or Concepts
Scenarios one and three are microeconomic principles because they deal with the part of economics that is about single factors and the effects of individual decisions. In both scenarios levels of vacancy were individual decisions and prices were adjusted to meet the decisions expectations. ...view middle of the document...
The supply curve in scenario two shifts up as the rental rate goes up because a zero vacancy rate is being achieved. This is leading toward a shortage because the supply has run out which leads to a higher equilibrium price.
In the T-shirt industry, when there is more supply than demand, you have to handle the surplus in inventory and the best way is to lower prices to ignite sales. The best case scenario would be that your supply is being sold and you are not sitting on too much inventory but just enough inventory to continue making sales and not to have a shortage scenario because then you will lose money. That is the key to understanding microeconomics, to find that the happy medium where supply and demand are being met and revenue is being maximized. Keeping a close eye on the shifts in supply and demand will help a business reach a profitable equilibrium price and quantity.
Keeping Macroeconomics in mind
In Macroeconomics an overall approach is used and as seen in the simulation, forces such as the government can step in implement decisions that affect all and not just individual people and...