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Supply And Demand Simulation Essay

1183 words - 5 pages

University of Phoenix-Baton Rouge CampusThe small city, of Atlantis, with luscious green areas and playground, with access to highways, and adequate sidewalk and streets puts traffic to a minimum. Pollution is low in addition to, tree lined streets, and well-maintained sidewalks allow the residents to enjoy hobbies like walking, jogging, or biking. The open space offer territory for wildlife. The housing is composed of both detached homes and apartments. Atlantis is well maintained, in good conditions, alone with low crime rate with excellent infrastructure. I will attempt to explain the supply and demand of two bedroom rental apartments in Atlantis. In addition, explain the supply curve, and the demand curve as well as equilibrium. Through different scenarios, explaining what factors that affect demand and supply, and consequently the equilibrium.I am the Property Manager, employed with Goodlife Management, which is a property management firm that is the only firm who manages seven apartment complexes in Atlantis. Some might say we have a monopoly in this market. My responsibilities include receiving 30-day notices for upcoming vacancies, establishing new rental rates, and setting advertising schedules.In scenario one, Goodlife has 2,000 two bedrooms apartment in the complexes. The current vacancy rate for those bedrooms is on a temporary, month-to-month lease, which is at 28%. My goal is to first drop the vacancy rate from 28% to 15% and maximize the revenue. I will attempt this by determining the monthly rental rate to ensure that more apartments are occupied and that revenue is maximized. Currently, the vacancy percent rate is 40.00%, the revenue is $1.56m, the surplus is 800, and the quantity demanded is 1,200 with a rental rate of $1,300. If I change the vacancy percent rate to 5.00%, and charge a rental rate of $950, the demand curve varies with quantities consumers demanded at various prices. I have made a good decision by bringing the vacancy rate down less than 15% because this enables me to increase revenue. At a vacancy rate of 5%, I am able to maximize revenue. With lower rental rates the revenue increase and reaches a maximum at a particular rental rate and quantity demanded, then decrease. At the rental rate of $950 per month, there are tenants for 1,900 apartments and the revenue is maximized at $1.81m.In scenario two, there are 2,500 apartments available for lease on a temporary, month-to-month basis. The current rental rate for the apartments is $1,100. My task is to lease out all the apartments and at what rental rate. Would I rent at the current rate of $750 per month? The answer is no. In order to lease out all the apartments, the rental rate will increase to $1,550 per month. For any supplier, a higher price is an incentive to supply more, when all other thing remains constant. Therefore, as rental rates increase the number of apartment that we are willing to lease increase. The supply curve is upward sloping because as the...

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