Supply and Demand Simulation

Essay by maxima23University, Bachelor's February 2007

download word file, 3 pages 4.3

As Property Manager for GoodLife Management in Atlantis responsibility for maintaining acceptable rental rates and quantity available apartments involves several factors. Personal preferences, economy, income, and rental rate all affect the ratio of vacant and occupied apartments. Decisions regarding supply, demand, and price require careful evaluation. Regular monitoring of supply and demand is necessary to remain competitive in the ever-changing economy we live in. As the community evolves, GoodLife must make accommodations to remain viable in the real estate industry.

When GoodLife came to Atlantis, they dominated the market since they were the only company offering rental apartments. This meant GoodLife could set the rental rate to any price they wished. At the same time, the company realized that higher prices would keep some renters away creating less demand. Surveys proved that rather than paying higher rent, people would move to nearby towns for lower rental rates. In order to maintain a low percentage of unoccupied apartments GoodLife set the rent to a reasonable amount as opposed to a higher rental charges.

As population increased, demand for apartments increased as well. GoodLife was able increase rental rate without sacrificing the number of occupied apartments. With the population boost, incomes raised as well. This led renters to become buyers, thus decreasing the demand for rental units. As a result, GoodLife needed to lower rent to attract more renters. In a further attempt to remain competitive, GoodLife renovated some apartments into condominiums. This allowed the company to reduce the supply of apartments that were in low demand.

Increased population was an asset in the beginning. As population grew, it became a drawback as traffic, congestion, and rental rates escalated. The government set a price ceiling on two bedroom apartment rentals in an effort to allow families to find affordable housing. The demand...