February 24, 2014
Supply and Demand Simulation
In the simulation I had to address the effects of supply and demand and how it affects the supply curve, the demand curve, and when supply and demand reach a point of equilibrium. I was also able to see what impact a price ceiling has on supply and demand as well as determined the rental rate for two bedroom apartments. Finally, I looked at how the quantity supplied of two-bedroom apartments affects the rental rate.
One of the shifts that stood out to me in the simulation was when I was looking at the supply and demand curves and how a shift in those curves affect the rental price of two-bedroom units, I noticed that as demand increased then supply would also have to increase which would lead to an overall increase in rental price of rental units.
When demand shifts upward, the price increases on the rental units. As supply shifts upward to meet the demand shift and the price shift there is a point where the demand and supply shift curves cross each other identifying a price that is the equilibrium point, or there is no excess or shortage in the market of the rental units. Once the new equilibrium point has been reached the difference between the old equilibrium and the new equilibrium is an increase in price for the rental units in question.
Through this simulation I have learned that the preferences of the public can greatly influence the supply and demand curves and therefor affect the price charged for an item. For instance, in pest control, when the weather turns colder and pests are not as prevalent, the public does not place a very high priority on keeping up with their pest control. It is also much harder to try and win new customers during this time period. However, once spring hits and the weather warms up the pests start moving around and the public begins to see that they have a problem. During this time period, the phones are ringing off the hook and it is very hard to keep up with the numbers of new customers wishing to have service.
The concepts of microeconomics in relation to the simulation on supply and demand are very important to understand because microeconomics deals with the individual’s behavior patterns and how they are able to influence the pricing of goods or services in a local market. In this case, the individuals that make up the local population are able to exert pressure on the rental firms and by doing so shift the supply and demand curves.
The concepts of macroeconomics affect the shifts in supply and demand in this simulation when