Eco365 Supply and Demand Simulation Paper

761 Words Nov 9th, 2012 4 Pages
Supply and Demand Simulation
ECO/365
Supply and Demand Simulation In the University of Phoenix simulation (2003), students are taken through the supply and demand of two-bedroom apartments in a city called Atlantis. The simulation itself is used as a tool to learn about the demand and supply curves as well as equilibrium. Other key learning points are the factors that affect supply and demand, the effect that a price ceiling has on the quantity demanded and the quantity supplied. Throughout the simulation, students determine the rental rates or how many apartments are rented out for a given month. A microeconomic principle that stood out at the beginning of the simulation was the use of the word “monopoly”. The simulated
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The second macroeconomic principle from the simulation was the supply curve demonstration. The student is tasked to identify correctly, the rental rate that the company would charge if it were to lease out all of the apartments. For any supplier, production costs normally increase for each additional unit of the product. In the case of the simulation, it was maintenance costs that were added for each unit rented out. This added cost meant that the rental rate had to increase as well. When the rental rate increased, the number of apartments that management was willing to lease out increased. This was a basic demonstration of how the supply curve works. At one point within the simulation, there is a shift in the demand curve. This is because there was an increase in the population in the city. At any given rental rate, more people rented apartments. This resulted in an increase in demand but the supply remained the same. As a result, the demand curve shifted to the right. The new equilibrium price is now higher than before and the number of apartments demanded and supplied increases. The change in expectations of management caused the supply of two-bedroom apartments to decrease. The expectation was that more individuals would prefer to live in a condo vice the two-bedroom apartment. It also eventually occurred and as a result, this factor caused the supply curve to shift to the

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