Supply and Demand Simulation

Essay by yayayeoUniversity, Bachelor'sA+, December 2008

download word file, 3 pages 5.0

The University of Phoenix online simulation entitled "Applying Supply and Demand Concepts" starts with the description of a fictional small town, Atlantis, and the rental market for two bedroom rental apartments. Below we will discuss the key points of supply and demand covered in the simulation, and by David Colander in the Book Economics, along with real world examples and results for the simulation.

In this simulation the reader is a property manager for GoodLife Management. His responsibly is maintaining economic equilibrium in the two bedroom rental market. Wikipedia states "In economics, economic equilibrium is simply a state of the world where economic forces are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change. Market equilibrium, for example, refers to a condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers.

This price is often called the equilibrium price or market clearing price and will tend not to change unless demand or supply change." (Wikipedia, 2008). Demand in this situation is controlled by population, price, and consumer preference. Supply is controlled by the number of apartments built by the company, the percent of vacant units, and the number of units the company decides to rent out.

One of the key points that the simulation shows is a cycle in business. "Phases of the business cycle include peak, trough, upturn, and downturn." (Colander, 2008) This is seen in the simulation when Lintech Inc moves into Atlantis and creates a population boom. Also when the home ownership becomes a trend and lowers demand for the two bedroom apartments.

Another point covered in the text and the simulation is "We must estimate potential...