Supply and Demand Simulation Summary
University of Phoenix
ECO360, Economics for Business I
The Supply/Demand simulation involves acting as property manager for GoodLife Management in the fictional town of Atlantis. GoodLife Management manages seven apartment complexes in Atlantis. The property manager is expected to adjust the monthly rental rate of two-bed rental apartments and the quantity of apartments supplied based on the market trends. Factors that influence the supply and demand for apartments include personal preferences, economy, income, and rental rates. Each of these factors affect the ratio of vacant and occupied apartments. Decisions regarding supply, demand, and price require careful evaluation. Regular
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The equilibrium rental rate was then higher than before, but the equilibrium quantity was less.
The last situation in the simulation introduced the concept of governmental price controls for monthly rental rates. Since the price ceiling was lower than the equilibrium price, the quantity demanded was higher than the quantity supplied. Goodlife could not afford to rent all apartments at the ceiling price. Other forms of revenue, such as increased key deposits, had to be implemented. Consequently, there was an excess demand, creating a supply shortage. Goodlife was then able to be more restrictive when selecting renters, which can affect economic and social aspects of the community. The imbalance of demand and supply can lead to discrimination in tenants and an increase in ancillary charges, such as key charges. As illustrated in the simumation, price controls can have negative consequences on the housing supply.
In conclusion, the simulation confronted the user with a variety of situations that affected the supply and demand of rental units. The prices and quantity supplied had to be adjusted according to the factors affecting the supply and demand. The key components from the reading material that were reinforced in the simulation were supply and demand, shifts in supply and demand, equilibrium, and price ceilings.
1. What causes the changes in supply and demand in the simulation?
The monthly
Marketplace Business Simulator is an on-line marketing simulation that incorporates all the marketing principles I have learned over the course of this semester and apply them into real world marketing practice. Simulation was used for the sake of instigating effective results and in that regard, this paper analyses the manner in which each quarter was carried through. The circumstances surrounding each of the decisions made are analyzed intricately and hence a manifestation of the impact of each for each of the quarters is laid bare.
This is a result of a demand shift to the left related to a lack of available tenants for the apartments. The property management company has to decrease rental rates allowing the quantity supplied to decrease as well (University of Phoenix, 2012), creating a downward swing in the supply curve. The price of rentals decreased to create less quantity that is available for rent creating equilibrium and a decrease in surplus. This is a difficult decision to lower price significantly but will continue to create revenue for the property management company while decreasing supply of vacancy.
In 2008, the American population saw a large wave of home foreclosures during the Great Recession that created an economic crisis that displaced millions of homeowners. Unable to recuperate from the terrible financial situation, these persons found comfort within the rental property industry. These previous owners, unable to purchase new homes, began renting property and living as tenants, contributing to the 4% growth record of the rental industry as published in a study that was conducted by Harvard University. With the growth of this industry, rental property owners began to devote more of their time to the development and marketing of their rental properties. These owners began providing lower rates for their properties, and they began making improvements that allowed them to increase the net profit that they received. With the continual “boom” of the industry and the popularity that it is receiving due to young adults needing places the live, rental property owners need an effective program that allows them to oversee their properties and communicate with their tenants.
The objective of the simulation was to maximise profits of Universal Car Rental Company. The simulation was run across three cities in Florida; Tampa, Orlando and Miami.
some initial work estimating the likely relationship between what tenants would be willing to pay
Two economic factors affect supply in a stable housing market, price of related goods or similar houses, and the price of the good, best represented by style or size in the case of the housing market. The affluence of a community typically determines how much homes sell for in those communities, and therefore communities where a lot of people want to live become areas where average home prices are high. (Kumar, 1) There is little space in these affluent communities, and therefore little supply. A good example is New York City, where no homes are available, only apartment buildings, and very few apartments are actively exchanged each year.
It is true that the Monte Carlo simulation method would make the real estate portfolio valuation more attractive. It is likely that the rental real estate cash flow will continue to grow. Why? Because many people have walked away from homes because of upside down mortgages; others lost their homes because of reductions in incomes or loss of jobs; and others because of natural disasters such as Hurricane Katrina, Tsunamis left them homeless. A large number of these people have decided to rent; some who may have never rented before—this creates a demand in renting. Therefore, using rents and price dynamics in real estate portfolios will look attractive, but the question is: Is it the correct way for the data to be presented or is this another method to influence valuations as discussed above in the Abdul-Rasheed and Aluko article, “client influence in residential property valuation”?
This case involves an investigation of the factors that affect the sale price of oceanside condominium units. The sales data were obtained for a new oceanside condominium complex consisting of two adjacent and connecting eight-floor buildings. The complex contains 200 units of equal size (approximately 500 square feet each).
As more renters look for homes in the area, larger homes have been transformed into multiple units. Investors can also find unique properties that rent retail and residential space within the same building. A number of the buildings in the area house a business on the first floor with a residence on the top floor. At these properties, investors can rent out commercial and residential space for a low investment
Melbourne’s inner-city apartment market is facing a record number of competition in 2017. However, despite this vacancy is falling and prices are on the rise, reflecting an underlying demand from a growing population. The strongest annual growth in weekly rents was seen in 1-bedroom apartments at 9.5%. 2 bedrooms recorded 5.0% growth while 3 bedrooms grew 1.1%.
A rent control is simply a way for the average tenant to be able to afford apartment suites and other rental units. The rent control acts as a Price Ceiling that is only effective if it is below the current market equilibrium price. A binding price ceiling will halt the rising prices in the favour of the consumer. Rent controls are meant to give the power to the tenant because the landlords cannot charge a higher price,
“Real estate is land, all of the natural parts of land such as trees and water, and all permanently attached improvements such as fences and buildings. People use real estate for a wide variety of purposes, including retailing, offices, manufacturing, housing, ranching, farming, recreation, worship, and entertainment.” (Answers.com) In order to more specifically focus on a specific area of real estate this discussion will deal with the housing industry of real estate. In this discussion, when housing is analyzed it will be in the realm of rental real estate.
BACKGROUND The evolution of the commercial property market with trends like shorter lease lengths and competition for new tenants in the market for example, means that landlords can no longer rely on traditional ways of attracting and retaining tenants. According to Rasila, H. (2010), “the competitive environment is changing and the real estate owners are seeking new ways of differentiating themselves from competitors”. Traditionally, landlords and landlords’ agents over the years have relied on incentives such as rent-free periods, fitting out and premiums to attract and retain tenants. According to Rasila, H. (2010), “traditionally, the business logic in renting
General market analysis has been conducted regarding the basic demographic data of population and employments trends, income, and age within the local trade areas respectively extending 1 and 3 miles out. Supply factors in real estate of a given trade area reflect the availability and vacancies of space, absorption rates and months of inventory of existing homes/units, and capture or market penetration rates of newly-constructed buildings.
Furthermore, the importance of efficient building services is highlighted through the link between building construction and service provision, and leasing and ownership issues in the current market. The current oversupply of office building stock, and prevailing market conditions of high incentive and vacancy rates have seen to a noticeable migration of tenants away from inferior buildings into more high-end stock