Supply and Demand Simulation

Essay by swinglineUniversity, Bachelor'sA-, August 2009

download word file, 4 pages 3.0

University of PhoenixnThe simulation begins in a small, well cared for town called Atlantis. Most of the homes are either detached houses or apartments. In the simulation, I was a Property Manager for GoodLife Management. I had the opportunity to examine how supply and demand affect the price of rent required in order for the property manager to continue a positive cash flow.

Causes of ChangeThere were several factors that caused a change to the supply and demand of the two bed room apartments rented by GoodLife Management. First there was a request from Susan Hearst, the National Property Manager, to reduce the vacancy rate to 15% while maximizing revenue. Next was Susan Hearst's request for a 0% vacancy rate. Later the Atlantis Housing Survey statistics found that the number of apartments expected to be demanded and the number supplied at the existing rate was out of balance. Next a company called Lintec Inc.

moves to Atlantis which changes the balance in the supply and demand for two bedroom apartments. Two years later tenants experienced increases in their income and decided to purchase homes rather than rent apartments. Finally, other companies decide to locate in Atlantis which turns this small quiet town into a busy city. Rent continues to rise so the government puts a ceiling on rental prices which will also affect GoodLife Management's decision-making process.

How Changes Determine DecisionsGoodLife Management's current situation with its two bedroom apartments is a rental rate of $1300 per month, a surplus of 800, a 40% vacancy rate and revenue of 1.56 million. Susan Hearst's request to reduce the vacancy rate to 15% translates into reducing the amount of rent charged. More people will want to rent these apartments if the price of the rent is reduced. The best decision is to reduce...