...Microeconomics and the Laws of Supply and Demand ECO/365 – Principles of Microeconomics 3/23/2015 Instructor: Microeconomics and the Laws of Supply and Demand The Supply and Demand simulation was to act as GoodLife Management property manager for a fictional town, Atlantis. This company manages about seven apartment complexes in the town of Atlantis. In this simulation the property manager was in charge in adjusting the monthly rental rate of GoodLife’s two-bed rental apartments as well as the quantity of apartments supplied based on the market trend. Many factors, such as personal preferences, income, economy, and rental rates influence the supply and demand for apartments. The ratio of vacant and occupied apartments is affected by each of these factors. A carful evaluation is vital when making decisions about supply, demand, and price, as well as a regular monitoring in order to remain competitive in the rental market. The first simulation had the objective of determining the two-bedroom apartments’ monthly rental rate for on provisional leases. Therefore, the rate for vacancy should be decreased to at least less than 15%, while the revenue should be maximized. When the rental rate of the apartments decreased and the demand increased, the vacancy rate decreased as a result. The simulation showed that as the rental rate is lowered the initial revenue increased, and reaching a maximum point at a specific rental rate. This then made the demand decrease. The solution is to...
Words: 703 - Pages: 3
...Running Head: Microeconomics and the Law of Supply and Demand Microeconomics and the Law of Supply and Demand ECO/365 February 12, 2012 Supply and Demand Simulation This week our facilitator assigned each student to participate in an economics simulation that allowed us to be in control over a property management company, named Good Life Management. In this simulation the student was able to use experimental economics and natural experiments. Atlantis is the city in which Good Life Management operates their seven apartment complexes. Atlantis is also a very desirable place to live, and keeps prices competitive. The simulation changed the economic, social, and political factors, and left the student to determine the correct market price to list the apartments. According to Colander, D. (2010) “Theories, models, and principles must be combined with knowledge of real-world economic institutions to arrive at specific policy recommendations”. Microeconomic and Microeconomics In this simulation there were many examples of how micro and macro economics influenced supply and demand. According to Colander, (2010) “Microeconomics is the study of how individuals choice is influenced by economic forces”. In the first simulation Good Life Management had 2,000 two-bedroom apartments with 28% vacancy rate. At this point the simulations recommendation is to lower the rent amount in order to get 15% vacancy which would maximize revenue for Good Life Management...
Words: 695 - Pages: 3
...RELATINOSHIP BETWEEN DEMAND, SUPPLY, PRICE AND INCOME ELASTICITY Essay Statement This essay is to critically discuss the concepts of demand and supply. That helps to understand how the product’s own price and income elasticity of people relates with each other. We would also discuss how these concepts would be useful to evaluate the fluctuations in the oil prices the world has experienced from January 2014 until August 2015. Demand Quantity of a particular product or service that is desired by the buyer is called Demand. The demand is basically depends on the price of the product. If the product price is low then the demand is high on the other hand if price is high then the demand is low. This relationship between demand and price is known as demand relationship. In this way the amount of a good that buyers purchase at a higher price is less because as the price of a good goes up, so does the opportunity cost of buying that good. In this way people will naturally avoid buying those things that are not valued for them. The chart below shows that the curve is a downward slope Figure1. Demand Relationship Curve The chart shows that higher the price lower the demand. Here P represents Price and Q represents Demand. So P1 is showing high price but Q1 means Demand is very low at that level. Then price goes down at P2 the demand increased at Q2 and so on. That means generally price reflects the demand. This demand relationship curve illustrates the negative relationship...
Words: 2070 - Pages: 9
...services in our economy can be traced to the basic laws of supply and demand that govern our society today. The prestigious economist Adam Smith once proposed that society was governed by an “invisible hand” which worked to self-regulate the marketplace in the midst of the ambitious goals of sellers and consumers alike. It is by this “invisible hand” that our economy today works, and it can be used to make sense of how the laws of supply and demand work together to guide markets such as that of ice cream. The law of supply states that a rise in the price of a good induces an increase in the quantity supplied, while the law of demand states that a rise in the price of a good induces a decrease in the quantity demanded. Ultimately, these laws are used to predict which direction supply and demand curves shift, which for this scenario can be due to weather changes, the specific days of the week, and sudden decreases in the supplies used to make ice cream. In the case that the school allows another student to sell ice cream on campus as well, the price of ice cream would fall due to increased competition. The owner of the small ice cream stand on campus is known to have experienced fluctuations in the daily sales of ice cream. One reason to explain this is due to the constantly changing weather. On warmer or hotter days, there is a greater demand for ice cream because people eat it in order to cool off. Due to this greater demand, Ice-Campusades is likely to sell out all of their ice...
Words: 1131 - Pages: 5
...Module 2 Written Assignment – Supply and Demand Cori Travers Rasmussen College Author Note This research is being summited on October 20, 2013 for Instructor Troy Stang’s B136/GEB1011 Section 21 Introduction to Business course Supply and Demand McDonalds, a globally acclaimed company, uses the factors of supply and demand every day to determine the impact of their operations. Supply is the availability of an item, while demand is the want or need to have that item (Solomon, Poatsy, Martin 2010). So what are the factors that determine supply and demand? Factors that affect supply are technology changes, changes in resource prices, price expectations, number of supplier’s, the price of substitute goods (Solomon, Poatsy, Martin 2010). Similarly, the factors that affect demand which are changes in income levels, population changes, consumer preferences, complementary goods and substitute goods affect how much the customer is willing to pay for the product (Solomon, Poatsy, Martin 2010). These factors can determine how much and at what price McDonald’s is willing to supply a product to a consumer. A main factor of supply that affects McDonald’s operation of business is resource prices. If a required resource to produce a product commands a high price, production costs will likewise be high, and the company will be less willing to supply their product (Solomon, Poatsy and Martin 2010). For example, consider that the price of beef increase – the increased cost of beef may...
Words: 884 - Pages: 4
...Assignment #2: Supply and Demand Knowledge and Understanding (/4) 1) Explain in your own words the concepts of supply and demand. Communication (/5) 2) Our school cafeteria sells a very limited amount of healthy foods such as low fat wraps, fresh fruit and high fibre breads. Write a proper paragraph that explains how the forces of supply and demand interact to produce the right amount of goods (food) at the right price – the equilibrium price and amount of goods available. (How do the forces of supply and demand result in the menu choices as they are in our cafeteria?) (/5) Thinking & Inquiry (/2 ) 3) Give a specific example of a marketplace (a place where producers and consumers meet) and explain why your example is a marketplace. (/2) Application (/18) 4) Demand: for each of the three situations below explain: i) If there will be an increase or a decrease in demand; any assumptions relating to the scenario ii) The reasons for the change in demand (i.e. what factor has caused the change?) iii) State how the change in demand may impact the price of the good / service. a) The demand for electricity during a very hot and humid week in July. b) The demand for rice if the price of potatoes has dropped significantly c) The demand for new cars if Canada’s economy is going into a recession 5) Supply: for each of the three situations below explain: i) If there will be an increase or a decrease in supply; any assumptions relating to the scenario ii) The...
Words: 345 - Pages: 2
...DEMAND CURVES Shows how much buyers of the product want to buy at each price possible. Vertical axis: price Horizontal axis: annual demand Downward sloping: the higher the price, the less consumers want to buy. SUBSTITUTES: increase of price of one product makes consumers buy more of the other product (demand increases) COMPLEMENTS: increase of price of one product makes consumers buy less of the other (demand decreases) Change in price-> movement along the demand curve Change in other factors-> shift of the demand curve SUPPLY CURVES How much sellers of a product want to sell at every possible price. Vertical axis: price Horizontal axis: annual supply Upward sloping: the higher the price, the more sellers want to sell. MARKET EQUILIBRIUM EQUILIBRIUM PRICE: price at which the amounts supplied and demanded are the same. (intersection of supply and demand curve) CHANGES IN DEMAND OR SUPPLY (a) Increase in demand: demand curve shifts right-up, so the price and the amount bought and sold rise. (b) Decrease in demand: demand curve shifts left-down, so the price and the amount bought and sold fall. (c) Increase in supply: supply curve shifts right-down, so the price falls, but the amount bought and sold rises. (d) Decrease in supply: supply curve shifts left-up, so the price rises, but the amount bought and sold falls. ELASTICITY OF DEMAND AND SUPPLY Elasticity is used to avoid the problem of unit of measure. Elasticity: measures...
Words: 655 - Pages: 3
...When we discuss the subject of economics, terms such as supply, demand, and equilibrium price are often mentioned. It is also common to see graphs which contain the supply and demand curve. We might ask, why are these terms so important when discussing economics? The answer is because these terms are the key components in the subject of economics. Therefore, before we can fully understand economics we must first understand the terms and how they are related. Demand can be described as the relationship between the price and quantity demanded for a particular good or service in specific circumstance. For each price provided, the demand relationship will tell the quantity that the customers are willing to purchase at a corresponding price. The quantity the customers are willing to purchase at a particular price is called the Quantity Demanded. An important thing to do is distinguish between demand and the quantity demanded. To explain the concept, the buyers are the people who want or need the product or service. The term “demand” refers to the willingness and ability of customers to purchase the good or service in the market. The demand relationship expresses the willingness and ability for the whole assortment of prices. To claim that a customer has a demand for a particular item is to declare that the customer has money with which to buy the item and is willing to exchange the money for the item. Customers do not demand what they do not truly want or need; therefore, a want or...
Words: 944 - Pages: 4
...Supply and Demand Supply and demand is perhaps one of the most fundamental concepts of economics and is the backbone of a market economy and the qualities they share. In this paper, I will discuss what causes changes in supply and demand, determine how changes in price and quantity will influence market equilibrium. I’ll also describe how the necessity of a good and the availability of substitutions affect prices and compare and contrast market systems and the role of an economist within those systems. Supply, a fundamental economic concept that describes the total amount of a specific good or service that is available to consumers. Supply also refers to the quantity of goods a vendor or suppliers are willing to make at a certain price that will benefit the growth of that vendor’s or supplier’s profits, business and demand. Demand refers to how much a product or service is desired by buyers. The law of demand is based off of “the higher the price is the lower the demand of the product will be.” Demand goes down. “If the price comes down the higher the demand of the product will be.” Demand goes up. The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship – Price is a reflection of supply and demand. There are many factors to cause change in supply and demand but the recession is one good example of when and how change starts occurring in supply and demand. In the current recession that we are living in people...
Words: 947 - Pages: 4
...When price and quantity demanded are concerned, supply and demand are the deciding factors. Producers and consumers decide the price in different ways. Producers determine the price by deciding what the worth is relative to the potential profit. Consumers vote with their wallets to tell producers how to set the price of the product. The price must be set at a point that effectively balances the supply and demand of the product. This gives worth to both the buyer and the seller. This will theoretically give the producer the most profit. My small ice cream cream stand, “Ice-Campusades,” has both the supply and price of ice cream remain constant. Due to these variables remaining constant, the shifts in demand can be observed more carefully. When ice cream remains unsold, it means that the supply is greater than the demand, or, there is a surplus of ice cream. When there is not enough ice cream for the number of customers, this means that the demand is greater than the supply, or that there is a shortage. As stated before, the supply and price remain constant, so the demand is the only factor that changes here. Since it can be observed as a lone dynamic variable, we will focus on why it shifts. The most obvious factor that can shift the demand curve is a change in consumer preference or taste. While ice cream is a delicious treat that many crave year-round, an individual may find a preference in another good. Sometimes in the country there is a trend in desserts. One instance...
Words: 820 - Pages: 4
...1. Suppose that the long-run world demand and supply elasticities of crude oil are -0.906 and 0.515, respectively. The current long-run equilibrium price is $30 per barrel and the equilibrium quantity is 16.88 billion barrels per year. a. Derive the (linear) long-run demand and supply equations. b. Suppose the long-run supply curve you derived above consists of competitive supply plus the quantity of OPEC supply. If the long-run competitive supply (not including OPEC’s production) is: QS = 7.78 + 0.29p, What must be OPECʹs level of production in this long-run equilibrium to maintain the price of $30? Ed= -0.906 Es= 0.515 Equilibrium: Price = $30 per barrel, Quantity= 16.88 billion barrels per year. a. Derive the (linear) long-run demand and supply equations. Q=a+bP P= (Q-a)/P Supply: Es=dQ/dP * P/Q .515= dQ/dP *30/16.88 dQ/dP=Es*Q/P = .515 *16.88/30 = 0.2898 -> b= 0.2898 Q= a+bP -> 16.88=a+0.2898*30 a=16.88-0.2898*30 -> a= 8.186 Linear long run supply equation: Q= 8.186+0.2898P Demand: Ed=dQ/dP * P/Q -0.906= dQ/dP *30/16.88 dQ/dP=Ed*Q/P = -0.906 *16.88/30 = 0.2898 -> b= -0.5089 Q= a+bP -> 16.88=a-0.5089*30 a=16.88+0.5089*30 -> a= 32.147 Linear long run demand equation: Q= 32.147-0.5089P b. Suppose the long-run supply curve you derived above consists of competitive supply plus the quantity of OPEC supply. If the long-run competitive supply (not including OPEC’s production) is: QS = 7.78 + 0.29p, What must be OPECʹs level of...
Words: 339 - Pages: 2
...Supply, Demand and Price Elasticity Team H ECO/212 Supply, Demand and Price Elasticity With the economy growing bigger and bigger, all the commodities that people rely on to go about their day to day lives does too. One commodity that people must have even if prices rose or drop is coffee. Team B will discuss the causes for shifts in supply and demand and how the shifts influence price, quantity, and market equilibrium. We will determine if coffee is a necessity or a luxury product, and identify the availability of a substitute. Last the discussion of necessity of coffee and the availability of the substitute and how it impacts the price elasticity. Webster New World Finance (2003) describes coffee as one of the most popular drinks in the world. The coffee bean is not grown in the United States but in tropical climates such as Asia, Africa, and S. America. Multiple causes can affect the shift in supply and demand of coffee. One factor that can affect supply is production surplus of coffee. According to Cruel (2002) Vietnam is almost producing more of the product than the second largest producer for the world, which is Colombia. Calculations from traders’ of the commodity expect it to grow worse as 2003 production of coffee was 10% higher than market absorption Cruel (2002). A second factor that can affect shift in supply and demand is decreased demand in the form of substitution. Energy drinks, colas with caffeine, and even bottled...
Words: 976 - Pages: 4
...Demand and Supply Analysis Paper Within the substance abuse treatment industry, many different products can be obtained by the consumer. The company I work for provides all of the different aspects of treatment, thus giving the consumer a one stop shop for all substance abuse treatment needs. This analysis will be focusing on the residential substance abuse treatment my company provides and how supply, demand, and price relate to one another. This paper examines three aspects of supply and demand regarding residential substance abuse treatment. The analysis looks at what drives demand and supply in residential substance abuse treatment. Also, the paper addresses the cause of these shifters over the next 3-5 years. Finally, the analysis explores future expectations of the price and how this effects the supply and demand of the product. Traditionally, substance abuse treatment has been considered what Wheelan (2010) calls a “luxury good” (p. 7). With the price of this service ranging in excess of $10,000 for 30 days of care, many low income clients are unable to obtain treatment. The service of treatment is valuable to the client because it takes them away from the environment in which they had been unsuccessful. Residential treatment provides a twenty-four hour a day safety net for the client. Additionally it teaches the client tools and skills to develop a safety net unique to their situation they can implement once the 30 day program is complete. Along with a place of...
Words: 1584 - Pages: 7
...In a labor market, the supply refers to the employees or the labor class and demand refers to the employer willing to hire these employees on a certain wage. In a labor market, equilibrium is reached when the employers are willing to hire all the number of employees on the wages these employees/labor are seeking and so the consensus is reached between the demand and the supply of labor. Labor market equilibrium behaves in a way similar to any demand supply equilibrium. The supply increases from many factors such as if the wages rise or the population increases. Similarly, the demand is affected by the factors such as unit cost per labor and economic situation and the workforce changes. The interesting fact here is that though the market always tends to achieve the state of equilibrium, but it never actually achieves it for long since the market conditions and workforce attitudes and society values are always changing. For example, women today are more a part of the labor workforce than they were a decade ago and it is still increasing. And such changes in the attitude and beliefs in society affect the supply and demand of labor too. Also, the fact to note here is that the demand of labor is created by the firm who manufacture goods or provide services and these are the firms that play a role to decide the per unit labor wages and have a role to play in achieving the labor market equilibrium. And to achieve this equilibrium, these firms make sure that the marginal cost to hire...
Words: 282 - Pages: 2
...Supply and Demand XECO 212 January 20, 2012 Hamsa Wilson Supply and Demand In this paper I will choose to write about buying a computer. I will explain the factor that causes the supply and the demand in buying a certain computer. Next I will give two substitutes for the computer that could be used instead of this type of computer. I will give two complements about the type of computer and the programs that were on it. The last thing that will be written about is the necessity of my computer and the impact of the price elasticity. Decision Making When choosing to buy a computer I that it had to have certain programs on the computer so that I may get the task at hand completed. The First thing that was done was too decided in buying the computer is what kind did I want and need. What type of programs would I need on the computer and if the programs cost more than I had? These are just some of the factors that I had to decide on what computer that I really wanted and needed for the task that I had to do. The factor that I had to look at also was what they had at the store that I went to. The next factor that I had was to consider what all I was going to do with this computer. The actors that were shown to me is the different types of programs on each computer and how much each computer memory had. The last factor for the computers were was how long each warranty was so that I could get my money back if something went wrong. The last factor that I had to...
Words: 899 - Pages: 4
