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Supply And Demand Simulation Essay

1389 words - 6 pages

The University of Phoenix Applying Supply and Demand Concepts Simulation (University of Phoenix, 2009) demonstrated the mechanics of how supply and demand operates in today's market. The simulation used the housing market to show different scenarios and how demand and supply worked in these scenarios. This paper will discuss the simulation and how different environmental factors affect supply and demand and how this affects decision making. Four key points of the simulation will be discussed along with how the concepts can be used in a hospital food service environment. Price elasticity of demand and how it affects consumer decision-making will be looked at along with a summary of the entire simulation.Scenario OneThe simulation portrayed GoodLife as a property management company who employed the user as a property manager. Different scenarios were provided to the user in which the user had to use decision-making skills to make the correct decision. The changes to the supply and demand were caused by several factors in the different scenarios. The factor in scenario one was the regional property manager, Hal, requested the property manager to bring down the vacancy rate from 28% to 15% and maximize the revenue. For the property manager to decrease the vacancy rate, prices needed to be lowered. This upholds the law of demand which states the higher price of a product, the less demand for the product. The rental rate of the apartments was reduced to $1050 which reduced the vacancy rate to 15 %. The revenue increased from 1.56 to 1.49 % and although the revenue increased initially, the revenue will hit a peak and decrease. The apartments quantity demanded went from 1200 to 1700 while the surplus decreased from 800 to 300.Scenario TwoThe change in scenario two that affected the supply and demand was Susan's request to have a zero percent vacancy rate. Hal rebutted that this was neither feasible nor profitable because of the increase in the cost of maintenance on each additional apartments. Hal suggested leasing out more apartments at a higher rental rate to help cover the maintenance costs. To make a profit on leasing the 2500 apartments, the rental rate would need to be increased to $1550. The supply curve would be sloping upward because the price increase is incentive enough to justify the increase in supply. This indicates as the rental rate increases, the number of apartments that are willing to be leased are increased also.Scenario ThreeThe Atlantis Housing Survey shows the statistics on the demand for two-bedroom apartments. Hal has realized that people working in Atlantis are staying in surrounding areas due to the lower rental rates. An imbalance between the quantity demanded and the quantity supplied exists and equilibrium needs to be restored. "Equilibrium is the point at which the quantity demanded equals the quantity supplied." (University of Phoenix, 2009). In order for the property manager to restore equilibrium, the rental rate must be...

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