Supply and Demand ECO/365 Supply and Demand The economy is run by the concept of supply and demand. The simulation provided a practical learning experience that brings together the concept of micro and macro economics. I will try to summarize my findings and the inner workings of the concept of supply and demand that the simulation offered. Economics is defined as “the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of society” (Colander, D. C. , 2010).
In other words, economics focuses mainly on three aspects and those are: what are we going to produce, and how much of it are we going to produce, in what way are we going to produce it, and lastly who are we going to produce it for. Microeconomics is more of an individual study and the choices individuals make, while macro economics focuses on the study of the economy as a whole (Colander, D. C. , 2010). In this simulation as people started moving into Atlantis they needed housing. People wanted to live in what was described in the simulation as the perfect city, tree lined streets, low pollution, and well maintained and peaceful city.
Goodlife had housing, and was able to raise the prices for the apartments that they leased due to the supply and demand concept. The choice is always the consumers when it comes to renting from Goodlife, or they could go outside of Atlantis to search for housing that may be cheaper. Because of a sudden rise in the population of Atlantis this lead to a spike in the demand in the housing market, and Goodlife could raise its prices because of that housing demand inside Atlantis. The next thing we look at is the opportunity cost, which is defined as the “benefit that you might have gained from choosing the next-best alternative” (Colander, D.
C. , 2010). This ultimately comes down to consumer choice and if someone could live in a neighboring community in a lower rent apartment, they would have a longer commute to work which would take time away from the other things they may enjoy. Whereas if they paid a higher rent in Atlantis to Goodlife they would have a shorter commute and more time for the things they enjoyed. Then there is in macroeconomics what is considered the invisible hand a silent force if you will. Goodlife could do one of two things it could lower its prices to entice customers to rent its vacancies as opposed to renting outside Atlantis.
Or, if Goodlife were renting their apartments then they could raise their price because there were fewer to rent from in the city. This is known as the invisible hand theory that “gives more power to the supplier of something that is in short supply” (Colander, D. C. , 2010). This theory says that I there is less apartments and more interested customers that Goodlife could raise its prices because of the demand for them. Goodlife needed to have a 15% vacancy in the simulation, and this would represent a shift in the demand curve.
For Goodlife to do this it had to lower its apartment rental prices, and thereby increasing the demand for apartments. On the other hand, Goodlife was able to supply more apartments when it raised its prices to cover maintenance fees by charging $1,550 a month. The housing market in my area of Texas has continued to drop because of such a large supply of housing. The demand for housing is at a current low. Once customers start to purchase homes in the area prices will stay the same and prices will steadily increase as the supply lessens.
In the event of a price change, the price elasticity of demand for goods and commodities determines a consumer’s behavior. Price elastic will be experienced in products in response to price changes. For example: If prices are lowered, consumers will demand more of the product. On the other hand, if prices were to increase consumers demand for a product will be lower. When prices fall suppliers of that product will deliver less and more when the product is in demand, or prices increase. The simulation of supply and demand provided information that involved micro and macroeconomics.
The simulation also provided a good understanding of how quantity and price can affect the supply and demand of products, and /or services. The simulation provides concepts that one could take and apply to their real world experience with a better understanding of how the economy works. After completing the supply and demand simulation one can take away a better understanding of how the economy works. As one goes through the simulation you start to understand the idea and theory behind Micro and macroeconomics, and how that understanding will aid you into understanding how shifts in supply and demand affects price and quantity.
References Colander, D. C. (2010). Economics (8th ed. ). Retrieved from The University of Phoenix eBook Collection database. University of Phoenix, (2012). Supply and Demand Simulation. Retrieved October 20, 2012 from: www. ecampus. phoenix. edu Investopedia (n. d. ) Economics Basics: Demand and Supply. Retrieved from Investopedia. com, http://www. investopedia. com/university/economics/economics3. asp#axzz1x3HdbLol