Supply and Demand Summary
ECO 365
January 14, 2013
Supply and Demand Summary
The town of Atlantis is a nice town to live in. This summary is about the economics involved in being able to rent two-bedroom apartments including the principles of microeconomics, macroeconomics, the supply and demand curves, price elasticity, and the principles in the simulation related to a real-world work environment.
The first microeconomic principle introduced in the simulation involves the setting of the rental rates in order to maximize revenue while at the same time lowering the vacancy rate to be less than 15 percent. By setting the rental rate to $950, the revenue was maximized and also brought the vacancy rate down to 5 percent. This is a microeconomic principle because according to Colander (2010), microeconomics is the study of individual choice, and how that choice is influenced by economic forces (p. 15). This exercise of adjusting rent rates shows how the rates influence the choice of individual renters. Lowering the rental rates also shifted the demand curve to the left. The cause of the shift was the lower rate causing a higher demand for the apartments. This shift in the demand curve caused the equilibrium price to be exactly where it needed to be in order to maximize revenue while at the same time maintaining a low vacancy rate. The shift in the curve also made the decision accurate at the selected rental rate.
Another microeconomic principle introduced in the simulation involves adjusting the amount of apartments available for rent on a month-by-month basis while at the same time taking in to consideration the change that would have to take place to those rental rates in order to cover overhead costs. This part of the simulation adjusted the supply curve to an upward slope. This happens because as the number of apartments supplied increases, the rate increases to cover maintenance costs. The shift in the supply curve caused the equilibrium price to be as equal as it could be in relation to the rental rate compared to the amount of apartments available. Due to the price being at equilibrium, the decision on how many apartments to lease was an accurate number.
The first macroeconomic principle in the simulation involves finding the equilibrium in order to attract more tenants. This is a macroeconomic principle because it takes in to account historical data based on the housing marker of Atlantis for the previous two years and rates in surrounding towns. This part of the simulation encompasses the whole housing economy of Atlantis making it a macro principle.
A second macroeconomic principle in the simulation involves a new company moving to Atlantis to set up operations. Because this company is coming to town, there is a change in population which cause a higher demand for apartments needed. This part of the simulation shows how economic factors such as employment and population change affect the supply and demand of the apartments making it a macro principle.
A familiar industry to apply what has been learned is military aviation. It is as simple as when there is more conflict or wars, the demand for military aviation is increased. When the use of military aircraft increases the demand for maintenance parts and fuel increases. Just the opposite holds true when there is less