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Supply And Demand Simulation Evaluation Essay

1034 words - 4 pages

AbstractThe simulation titled "Applying Supply and Demand Concepts" was an exercise in evaluating the way that supply and demand affect each other and change the curve and direction of the slope while keeping balance or equilibrium. The task was to complete the scenarios and evaluate how the changes in the demand and supply changed the way the company did business. The final task was to find a way that this information can be of use in my place of work.Supply and Demand SimulationIntroductionIn the simulation "Applying Supply and Demand Concepts" the regional property manager, Hal Morgan of Good Life Management, wants to increase the demand for their two-bedroom temporary month-to-month rental rates in Atlantis. The supply and demand shifts during the seven year period used in the simulation. I will be discussing the changes that occur and how that will affect the balance in the supply and demand curves.Scenario OneThere are several changes in the supply and demand shown and causes for each. In the first year the rental rate must be reduced to increase the demand even though Good life Management holds a monopoly in this area. To do this we need to lower the rental rate to $1050.00 a month. This brings the occupancy rate down from 28 % to 15% and income will be at 1.79 million dollars. The apartments demanded now rises to 1700 as the price of the two-bedroom apartment's fall to the rate of $1050.00 with a surplus of 300.Scenario TwoScenario two has Hal Morgan of Good Life Management wanting to increase the current rental rate from $1100.00 to $1550.00 a month. At the current rental rate it is not profitable to rent out all apartments with the maintenance costs that will accrue. To lease out all 2500 apartments and still make a profit the apartments need to be rented at a much higher rate. This increases the supply curve. As the rent rate increases, the number of apartments supplied increases.Scenario ThreeIn scenario three there is an imbalance reported between the quantity demanded and the quantity supplied. The monthly rate is changed to $1150 to remove this imbalance. At this rate we would lease 2000 apartments leaving no shortage or surplus.Scenario FourScenario four occurs at the beginning of the fourth year. Goodlife has increased the number of apartments it manages to 3000 with a monthly rental rate of $1150 and the good news of an influx of residents that will be working at Lintech, Inc., a new company in Atlantis, the demand and supply of 2 bedroom apartments will change. The demand increases while the supply does not change when the rental rate is increased to $1400 a month. At this rate we can rent 2350 apartments with no shortage or surplus.Scenario FiveAt the start of year five Lintech employees have received an increase in income causing many renters to consider purchasing a detached home. While demand decreases the supply does not change at $1300 a month. At this rate we can rent 2250 apartments with no shortage or surplus in the...

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