The purpose of this paper is to summarize the supply and demand simulation in Resource for ECO/360, answer the instructor's questions regarding the simulation, and provide a summary of the results of the simulation. After reading this paper, the audience should understand how the simulation helps the user to better comprehend how the market is affected by supply and demand.
The purpose of the simulation is to familiarize the user with the demand curve, supply curve, equilibrium, and price ceiling. The simulation begins by introducing the user to the fictional town, Atlantis. In the simulation, the user plays the part of Property Manager of GoodLife Management in Atlantis. GoodLife Management manages seven apartment complexes in Atlantis and it is the Property Manager's duty to adjust the monthly rental rate of two-bed rental apartments and the quantity of apartments supplied based on the market trends.
Following the introduction, the user's first objective is to determine the monthly rental rate for two-bedroom apartments on temporary leases.
The vacancy rate must be decreased while maximizing revenue. As the rental rate of the apartments is decreased, demand increases and results in a lower vacancy rate. According to the simulation, "As you lower the rental rate, revenue initially increases, reaches a maximum at a particular rental rate and quantity demanded, and then decreases." The key is to discover what rental rate offers the highest possible revenue with a low vacancy rate.
At the next scenario, the supply curve is introduced to show the user what quantities a supplier would provide at various prices of the product. When the user increases the rental rate, more two-bedroom apartments are supplied. The higher the price a consumer is willing to pay for a product, the higher the quantity the supplier is willing to provide. Thus, the...