DEMAND AND SUPPLY

Demand and Supply

Demand and Supply

Introduction

The Supply and Demand Simulation was an exercise in applying the supply and demand concepts of two bedroom apartments in the fictional city of Atlantis. Going through the simulator provided answers to the question of what caused the changes in supply and demand. Also, (David, 2004)the decision making process was effected by the shifts in supply and demand as it pertains to the rental price and quantity of the two bedroom apartments.

Demand and Supply

Four key points were raised in the simulator. These points were economic growth, business cycles, unemployment, and inflation. Practical application can always be incorporated no matter what industry is being addressed. A person can always take away from a learning experience some concepts to incorporate into their own organization. In year 1, the request was for the vacancy rate to be brought down to 15%. In doing so, the monthly rental rate decreased. When the rental rate is reduced, the demand for more apartments is increased and therefore the vacancy rate is decreased. (David, 2004)

In the next section of the simulator, the demand was to lease more apartments. The rental rate then needed to increase, to $1,550 per month, in order to lease all available apartments because of the increase in maintenance costs. The next issue addressed was the imbalance between quantity supplied and quantity demanded. A balance was struck due to a lowered monthly rental rate. The rate decreased, then, to $1,050. With the demand and supply in a state of equilibrium, there is no incentive for the rental rate or the number of apartments to change. (David, 2004)

After two years, a new company, Lintech, Inc., moves into town and creates a greater amount of jobs and also increases the population of Atlantis. This is one of the major contributors ...