Eco/360 Supply And Demand Simulation Essay

1221 words - 5 pages

The purpose of this paper is to summarize the supply and demand simulation in Resource for ECO/360, answer the instructor's questions regarding the simulation, and provide a summary of the results of the simulation. After reading this paper, the audience should understand how the simulation helps the user to better comprehend how the market is affected by supply and demand.Content SummaryThe purpose of the simulation is to familiarize the user with the demand curve, supply curve, equilibrium, and price ceiling. The simulation begins by introducing the user to the fictional town, Atlantis. In the simulation, the user plays the part of Property Manager of GoodLife Management in Atlantis. GoodLife Management manages seven apartment complexes in Atlantis and it is the Property Manager's duty to adjust the monthly rental rate of two-bed rental apartments and the quantity of apartments supplied based on the market trends.Following the introduction, the user's first objective is to determine the monthly rental rate for two-bedroom apartments on temporary leases. The vacancy rate must be decreased while maximizing revenue. As the rental rate of the apartments is decreased, demand increases and results in a lower vacancy rate. According to the simulation, "As you lower the rental rate, revenue initially increases, reaches a maximum at a particular rental rate and quantity demanded, and then decreases." The key is to discover what rental rate offers the highest possible revenue with a low vacancy rate.At the next scenario, the supply curve is introduced to show the user what quantities a supplier would provide at various prices of the product. When the user increases the rental rate, more two-bedroom apartments are supplied. The higher the price a consumer is willing to pay for a product, the higher the quantity the supplier is willing to provide. Thus, the supply curve is an upward slope.The third situation calls for the user to decide the equilibrium monthly rental rate for two-bedroom apartments for temporary leases. In order to bring equilibrium to the quantity supplied and the quantity demanded, the Property Manager must lower the monthly rental rate to decrease the surplus of available apartments. When the quantity demanded and quantities supplied are equal, there is no need for the number of apartments or the rental rate to change.The fourth objective is to discover the direction of shift in the demand and supply curves. Due to an expanding population, the demand for apartments has decreased while the supply remains constant. Therefore, the demand curve shifts to the right. Since demand is greater than the quantity of apartments supplied, rental rates are increased. As rates are increased, demand decreases and supply increases. Eventually, as rental rates and supply increases while demand goes down, equilibrium is reached.The fifth scenario provides a situation in which the population's income increases and results in a decrease in demand for...

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