Microeconomics and the Laws of Supply and Demand
William Rigney
ECO 365
Daniel Rowe
8/3/2015
A crucial concept of microeconomics are the laws of supply and demand. In the simulation this week, a fictional property management company, Goodlife, is operating as the only apartment rental company in the city of Atlantis. This simulation allows us to see how the company is affected, and reacts to various economic factors. For this paper, I will examine two macroeconomic and microeconomic concepts, and determine how shifts in the supply and demand curves affect the equilibrium, decision making, quantity supplied, and the prices of the apartments being rented.
The microeconomic effects can be categorized as changes in supply and demand and equilibrium because these only effect the small apartment market in which Goodlife operates. In the simulation, it was shown how a shift in either the supply or demand curve could easily cause a major change to the economic environment. As an example, if the demand curve were to shift to the left, this would show a decrease in demand by consumers and a lower number of occupied apartments. A situation such as this this occurred in the simulation as more people desired property ownership as their wages increased, causing Goodlife to drop their rent prices to compensate for this. The equilibrium price became lower due to the decrease in demand for rentals, while the supply and quantity remained constant.
As the supply curve shifted to the right, it showed an increase in apartments that were available to rent. This situation would happen if Goodlife expanded building, adding even more units to the rental market. If it was assumed that there was no change in the demand, the solution in this case would be to lower the rent to achieve maximum occupancy. This could add up to be a very profitable decision if the demand was sufficient enough to rent all of the units.
In the end, Goodlife needs to make their...