Supply and demand represent an efficient economic model of price determination in a particular marketplace. In fact, the concept of supply and demand emerges as one of the fundamental ideas of economics. Lengnick (2013) points out that prices are perceived as an important tool used in the market to balance how much individuals usually demand. In case when goods are identified as scarce, the market naturally decreases the precise quantity demanded by individuals. In other words, a situation in which prices are increased determines that individuals tend to purchase fewer goods. As indicated in the simulation, Atlantis is an adequately maintained city that offers much to residents in terms of properly functioning infrastructure and insignificant crime rates. It has been indicated that GoodLife Management is the property management company that succeeds in managing various apartment complexes within Atlantis.
Considering the size of the firm and the scope of its operations is an important element of the implementation of the supply and demand curve so that economists would be able to present relevant arguments of determining the equilibrium in the market.
In this context, the application of microeconomic and macroeconomic principles is relevant. Supply and demand are actually identified as microeconomic principles. Based on the information provided in the simulation, it turns out that a decreased rent amount would usually lead to maximizing revenue for the management company. Upon the arrival of Lintech in town, the direct result was the gradual increase of population and jobs, and thus the demand for housing options increased as well. The simulation also indicates the availability of macroeconomic principles, such as that the government was forced to create a ceiling of $1550 for the monthly rent of two-bedroom apartments, as the target was middle-income families. The creation of the mentioned ceiling was done with the purpose to enable these families with a strong sense of flexibility to enhance their lives in the respective city.
There are certain shifts demonstrated in the supply and demand curve, which has been indicated in the simulation. It is essential to note that shifts in the supply curve are evident upon increase generated in the number of apartments. The result of increased rental rate and number of apartments is that the demand curve shifts down (Huang, 2012). The arrival of Lintech in town determined particular changes in the demand curve, causing it to move to the right. At the same time, the supply curve has not been affected due to the higher number of apartments demanded than the apartments claimed for a lease by GoodLife at the present rental price.
As it becomes clear, supply and demand demonstrate relationships between price and quantity. As Huang (2012) argues, equilibrium emerges at times when supply is equal to demand. In the described simulation, there would be certain effects on the equilibrium determined by the factors of surplus and shortages of apartments. In fact, not only the equilibrium price is being affected but also the availability of particular quantity along with the decision-making process. Given that the concept of supply and demand finds extensive daily applications, it can be related to various scenarios in the workplace. For instance, one’s responsibility to manage the budget within an organization reflects adequate knowledge of the supply and demand concept because of the necessity to divide that budget between various sections.
There are different factors that influence shifts in supply and demand. Microeconomics is concerned with exploring behavioral patterns of individual households and organizations, as the focus is on making relevant decisions on the allocation of resources (Lengnick, 2013). Some of the most important factors that affect shifts in supply and demand in the market refer to size of population, price and growth. However, it should be considered that the principles of microeconomics are mostly applicable in situations where goods and services are purchased and sold. It is apparent that such actions can be witnessed on a daily basis.
When it comes to price elasticity, it is significant to focus on the demand affect. The price elasticity of demand turns out to measure the rate of response of quantity, which is demanded as a result of persistent price change. A relevant aspect of the product demand’s curve is to determine the precise amount of changes required when simply the price should change. In the context of the simulation, it appears that when the demand for rentals reduces, this leads to reduced price of renting an apartment (Bergin, 2003). Yet at times when the supply decreases or increases, the rental rate remains unchanged. In case the demand increases, the increased rental rate can be explained with the fact that GoodLife simply understands the meaning of supply and demand, and applies it properly under the mentioned circumstances. The basic idea here is to maximize on different opportunities that are available in the market, which would further lead to making extensive profits.
As it has become clear from the simulation as well as from extensive research in the field, the concept of supply and demand is an inseparable part of daily life (Huang, 2012). Along with microeconomic and macroeconomic principles, the concept of supply and demand emerges as a fundamental aspect of global economy and is relevant to any contemporary organization (Bergin, 2003). Companies supplying various goods and services, such as the one providing apartments in the city of Atlantic, demonstrate one of the sides of the equation. Individuals renting those apartments represent the second side of the equation.
- Bergin, P. R. (2003). Putting the ‘new open economy macroeconomics’ to a test. Journal of International Economics, 60(1), 3-34.
- Huang, M. (2012). Housing deep-habit model: Mutual implications of macroeconomics and asset pricing. Economics Letters, 116(3), 526-530.
- Lengnick, M. (2013). Agent-based macroeconomics: A baseline model. Journal of Economic Behavior & Organization, 86, 102-120.
