Supply and Demand

Essay by illdjUniversity, Bachelor'sB-, February 2010

download word file, 3 pages 4.0

Supply and demand interact, each having an effect on the other. When the supply increases past the demand, sellers must compete for buyers. The sellers have to lower their prices to sell their supply. When demand is high, the sellers can raise the price they are willing to pay. When the price goes up, the circle of supply and demand starts again. This concept has been around for decades. This paper will discuss the simulation for Economics for Business I. The paper will show how shifts in supply and demand affect decision making. The paper will also tell how to apply what was learned from the scenario.

The scenario was simple, it took the participant through the ups and downs of renting two-bedroom apartments in Atlantis. The participant was able to determine the monthly rental rate. GoodLife is the name of the company that manages an apartment complex with 2,000 rooms.

The beginning vacancy rate is 28% and the object for the first portion of the scenario is to bring the vacancy rate down to 15%. The first thought was to have the vacancy rate to be at zero. A vacancy rate that low would require reducing the rent from $1300 per month down to $900. This decrease of $400 might not sound like much. However, there are 2,000 rooms in the apartment complex. Reducing the rent by that much goes for the tune of $800,000. There had to be a way tot decrease the vacancy rate but maximize profit.

In the second part of the scenario there is a need for a 0% vacancy rate. This seemed like an easy task. To rent all of the apartments the most logical plan of action would be to lower the rent. The rent was reduced considerably for this second part. However,