Supply and Demand Simulation
The GoodLife Management supply and demand simulation presents a series of situations in which students must take on the role of a new property manager. GoodLife Management is a property management firm managing apartment units in the city of Atlantis. GoodLife is the only property management company in Atlantis, and thus has a monopoly in the market (University of Phoenix, n.d.). The student, in the role of property manager, must apply the concepts of supply and demand in the simulation to make effective decisions for GoodLife Management regarding pricing and supply..
In the first scenario, the simulation asks the manager to maximize revenues and bring vacancy below a 15% threshold by adjusting pricing. Following the laws of supply and increase demand the property manager decided to lower the price of the two-bedroom rentals because more quantity is demanded at a lower price. Reducing the rental rate will drive demand, increasing the number of units rented, and decreasing the vacancy rate. At the point where revenues were maximized, with a rental rate of $950, vacancy was at 5%, meeting the goals for the scenario.
Scenario 2 asked the manager to reach full occupancy, leasing out all of the apartment units, and determine the necessary rental rate. In order to meet this request, the property manager needed to raise the rental costs. If the apartments were leased at the current, lower, price revenues would be impacted due to the increased cost of maintenance. As more apartments are leased, maintenance costs increase, and the rental rate must be increased to account for it. Higher prices are an incentive to suppliers to increase supply, as revenues will increase.
Scenario 3 looks at the imbalance between supply and demand quantities in relation to the rental rate for leases. Raising the rental rate is beneficial to revenues, but is also detrimental to demand for units. To reach a situation in...