Supply and Demand Simulation
May 12. 2014
Supply and demand simulation
From the University of Phoenix supply and demand simulation I identified a few microeconomic and macroeconomic principles. Monopoly and Maximizing revenue are two microeconomic concepts. Colander (2010) explains that microeconomics is “the study of individual choice, and how that choice is influenced by economic factors (p. 15)”. Economic factors and the market influence both of them. Macroeconomics, on the other hand, is “the study of the economy as a whole (p. 15)”. Equilibrium and supply and demand models fit in this category because they are affected by many different factors, but can only be understood as a whole.
During the simulation, a shift on the demand occurs when a new company ...view middle of the document...
When the shift of the demand occurs, a temporary shortage of apartments occurs, exerting an upward pressure on the price along the supply curve. As the rental rate increases, the quantity demanded and supplied increases, reducing the shortage. When this happens the new equilibrium at $1400 and 2350 apartments leased.
A case during the simulation where a shift of the supply occurs is when GoodLife converts some apartments into detached condos for sale instead of for lease. A change in the consumers preference causes the demand for apartments to decrease and the supply of leased apartments to decrease as well. When this happens, at any given rental rate there are less tenants and less apartments for lease. Both demand and supply curves shift to the left. The new equilibrium depends on which shift is greater. In this case, the shift of the supply was bigger reaching a new equilibrium at 1900 apartments leased at $1475
How do the concepts of microeconomics help you understand the factors that affect shifts in supply and demand on the equilibrium price and quantity?
The concepts I have learned from microeconomics help me understand that, although I may have my own preferences, the prices of products in the market depend of many other consumers preferences. For example, I may be willing and able to pay $50 for a product, but if this were sold at $30, I might consider buying two. Other consumers may have different preference and only be willing to buy the same product at $20. The market works itself to find a happy medium where so many of the same product will be bought and sold at a certain price. This is how I understand macroeconomic factors too, because many individuals and many external factors influence the economy. For example, if the product were a cell phone or computer with better technology.
Colander, D. C. (2010). Economics. Retrieved from the University of Phoenix eBook collection.