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Supply and Demand Simulation - Essay Example

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Additionally, the simulation focuses at providing an explanation of how price elasticity of demand affects consumers purchasing and firms pricing strategies. 1. Identifying two micro and macro economics principles from the simulation Micro and macro economics are two main branches of economics that facilitate economic decision making. For instance; a simulation was taken from the Atlantis town where the rent of a two bedroom houses was managed by Good Life management firm (Warker, 2010). The rent of two bed room was taken into consideration and how it affects demand and supply. The first micro economics principle focuses at decreasing amount of rent and vacancy cost to maximize profits by Good Life Company this in turn leads to a change in demand and supply curves respectively (Warker, 2010). The second micro economics principle involves increasing the amount of rent and lease as new companies come to town making the demand for houses to rise (Warker, 2010). On the other hand, the first macro economics scenario was witnessed through the statistical housing survey. The report indicated that the overall demand for houses in the cities adjacent to Atlantis was higher as many workers in Atlantis come in large number to take advantage of lower amount of rent charged (Warker, 2010). The second macro economics principle involves the government setting a price limit on the amount of rent charged so that middle class families working in the cities can afford (Warker, 2010). The reasons why the first

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two scenarios have been categorized as micro economics is because they focuses on how firms and individual make choices on how to utilize scarce resources to maximize their utility (Ayers & Collinge, 2005). On the other hand, the second two scenarios have been categorized as macro economics because they affect the performance of the overall economy (Ayers & Collinge, 2005). 2. Identify at least one shift of the supply curve and one shift of the demand curve in the simulation. What causes the shifts? A shift in supply and demand curves may be attributed to changes in expectation and population respectively (Ayers & Collinge, 2005). For instance, if the suppliers expect that rental prices would decrease in the future, they may increase quantity supplied leading to an upward shift in supply curve (Mankiw, 2011). On the other hand, an increase in population as new companies come to town may cause a right ward shift in demand curves as new companies and people come into town (Mankiw, 2011). The two situate ions may be represented diagrammatically as shown below. A shift in Supply Curve Prices Left Ward shift in supply curve Qty supplied A shift in Demand Curve Prices Right Ward Shift in Demand Curve Qty Demanded Source: Author 3. An analysis of how each shift would affect the equilibrium price, quantity, and decision making Prices E.P Equilibrium point E.Qty Quantity Source: Author A left ward shift in supply curve may cause an increase in equilibrium price and a decrease in equilibrium quantity (Baumol & Blinder, 2012). On other hand, a right ward shift in demand curve may cause a decrease in equilibrium price and an increase in quantity demanded (Baumol & Blinder, 2012). 4. How may you apply what you learned about supply and demand from the simulation to your workplace or your understanding of a real-world product with which you are familiar? I may apply the simulation in making individual choices on

Summary

Supply and Demand Simulation Name: Institution: Course: Tutor: Date: Introduction The principle of demand and supply assumes that when all other factors are held constant (ceteris Paribus), an increase in demand may lead to an increase in prices of goods and services (Mankiw, 2011)…
Supply and Demand Simulation
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