Eco 365 Supply and Demand Simulation
Eco 365 Supply and Demand SimulationTopic | Answer |
What caused changes (please indicate if the changes are movements along or shifts) in supply in the simulation? | Movements along the supply curve: quantity supplied increased when rental rates increased. Good.Shifts: A change in expectations of the number of apartments available caused a shift to the left (decrease) because apartments were expected to be converted to condominiums for sale. Good. |
What caused changes (please indicate if the changes are movements along or shifts) in demand in the simulation? | Movements along the demand curve: quantity demanded increased when rental rates decreased. Good.Shifts: A change in population of Atlantis caused a demand shift to the right (increase). Also, a change in preference for detached homes causes a demand shift to the left (decrease) Perfect. |
Key point #1 emphasized in the simulation | By decreasing the rental rate, GoodLife increased demand and rented more apartments (leaving 100 surplus) while maximizing revenue. If GoodLife wanted 0% vacancies, they would need to reduce the rental rate further and also accept less revenue. Good. |
Key point #2 emphasized in the simulation | As the number of rented apartments increased the higher cost to maintain; therefore, for GoodLife to increase supply they could not keep the rental rate at the current rate but needed to increase the rate. Good. |
Key point #3 emphasized in the simulation | To achieve a balance of quantity demanded and quantity supplied, GoodLife needed to find the equilibrium. As rental rates decreased, demand increased and supply decreased until they reached the point of equilibrium when demand was satisfied with no supply shortage or surplus. Good. |
Key point #4 emphasized in the simulation | An increase in Atlantis’s population shifted the demand curve to the right and caused and upward movement along the supply curve. This happened because the quantity demanded caused a temporary shortage. Hence, GoodLife...