Supply and Demand Essay

Submitted By ninjagovroom
Words: 896
Pages: 4

Micro and Macroeconomics play a large role in our lives on a daily basis. When it comes to deciding simple every day purchases, or setting prices for our company’s products, there are many factors and influences that come into play, all dealing with macro and microeconomics. In the case of the week two supply and demand situation, there were many things to be learned. In this scenario, one acts as the property manager for GoodLife Management, setting the rates and filling vacancies in apartments in the city of Atlantis. There were principles and concepts involving macro and microeconomics, shifts in the supply and demand curve, and effects that influence the equilibrium price and decision making of the apartments in question in the scenario provided. In the week two supply and demand simulation, one could identify many different microeconomic as well as macroeconomic principles or concepts. Two microeconomic concepts used in the simulation were the equilibrium principle and comparative advantage. According to Colander (2010), equilibrium occurs when “opposing dynamic forces cancel each other out.” In this simulation, equilibrium occurs when both supply and demand cancel each other out. Comparative advantage, also according to Colander (2010), essentially is the ability for one to produce a product or good more efficiently than other producers. In the case of the simulation, the GoodLife team has a monopoly on the market, thus they can provide units cheaper than other organizations. These two would be microeconomic concepts because they deal with “individual choices” (Colander, 2010). The macroeconomic concepts shown in the simulation are supply and demand. Supply essentially is the amount of units available, and demand would be the actual demand for the units available. These are macroeconomic concepts because they deal with “the economy as a whole” (Colander, 2010) including all of its influences. While “working” under this simulation as the property manager for GoodLife Management, one witnessed different influences of the both the supple curve and demand curve. In one scenario, the supply curve shifted downward after the price was dropped due low demand for the apartments. This shift occurred when detached homes became in demand, thus demand for the apartments dropped. In order to fix this issue, the price for the apartments had to be dropped, which would bring the demand up as they become more affordable to more people. This scenario also shows a change in the demand curve, as the demand curve initially dropped with the apartments being priced at a certain number, and affordable detached housing becoming available. When the price was brought down, demand began to rise back upward due to the supply dwindling. These shifts would have an effect on the equilibrium price, quantity, and decision making as well. The equilibrium price would shift downward as less are demanded due to cost, thus cost being brought down would eventually meet the price of the apartments offered. These shifts in supply and demand would also affect quantity, as when an apartment is overpriced and under demanded, there would be more apartments available. As the demand rises the supply would dwindle, and the quantity available would get smaller as well. These concepts involving supply and demand can be applied to many peoples own lives and workplaces. For instance, it explains why car dealerships always cut prices at the end of the year to make room for their new products. The dealership see’s that their supply of units is going to be outdated soon, and the demand has dwindled, thus to increase their demand for their units, they will bring down…