Supply and Demand Simulation: Project AtlantisEssay Preview: Supply and Demand Simulation: Project AtlantisReport this essaySupply and demand simulation: Project AtlantisThe supply and demand simulation was a simulation of GoodLife Management, a property management firm controlling all of the seven apartment complexes in the city of Atlantis. For the 9 year period in the simulation the housing market had many ups and downs because of businesses moving into the area bringing an increased amount of jobs, the change in consumer preferences and company expectations, and the policy changes induced from the government.
What causes changes in supply and demand in the simulation?In year one GoodLife Management wanted to fill the apartments with a less than 15 percent vacancy rate while gaining the most possible revenue. They did this by lowering prices to $950 rent per month on their apartments. The lower price increased demand for the apartments and GoodLife filled 1900 apartments with a surplus of only 100 apartments leaving a vacancy of only 5 percent.
Lintech Inc. and other companies came into Atlantis and increased the population in the city. When the new companies moved in it created a increase in demand, shifting the curve to the right, this gave GoodLife the incentive to rent out more apartments because a higher equilibrium price is accomplished.
During year 7 consumers preferred detached homes to apartments so it provided a shift to the left in the demand curve and created a surplus in apartments and GoodLife had to lower their rental rates to keep up with the competition. The shift in demand moved the supply down to reach another equilibrium at 2,250 apartments rented at $1300 per month. Midway through year 7 GoodLife converted several hundred apartments into condos for sale to keep up with the market demands and consumer change in preference. This caused a shift in both the supply and demand curves because consumers preferred detached homes and the company expected condos to be the best substitute for those detached homes. In July of year 7 1,900 apartments were rented out at $1,475 per month and equilibrium was achieved.
Throughout year 9 Atlantis was transformed. More companies were coming in and bringing more people and more income. The local government put a price ceiling of $1,550 per month on the apartment. Demand increased causing a shortage in apartments for rent because GoodLife was not willing to provide as many apartments as demanded at or below the price ceiling. GoodLife provided 2,275 apartments at the price ceiling of $1,550 per month with consumer demand of 3,150 apartments creating a shortage of 875 apartments.
How do shifts in supply and demand affect your decision making?When consumer demand for apartments increased (shift to the right) it creates a shortage at the original price so price increases to level out demand to an equilibrium quantity and a new equilibrium price. As consumer preferences change and demand is reduced (shift to the left) it creates a surplus in apartments and GoodLife lowers their rental rate creating a move down on the supply curve to a new equilibrium quantity and price. As consumer preferences and supplier expectations changed both curves shifted to the left and supply and demand were less. This created an entirely new equilibrium price and quantity for the GoodLife. When more companies came to Atlantis and the government put a price ceiling into effect the demand increased, but GoodLife was only willing to increase supply up to a certain point at the price ceiling since equilibrium price and quantity was above it. This created a shortage of apartments with no alternatives.
List four key points from the reading assignments that were emphasized in the simulation.The four main concepts from the reading assignments that were emphasized in the simulation were: demand and supply, equilibrium, shifts in demand and supply, and the effect of a price ceiling. Demand and supply change and shift constantly because of so many outlying forces. These include forces such as population changes, preference and expectation changes, and governmental influence. As all of these changes occur GoodLife moves to reach the equilibrium price and quantity so that they can maximize their revenue. When a price ceiling occurs it keeps prices down so that consumers are protected from high pricing, but it creates problems also. Price ceilings create shortages because the consumer demands more apartments than
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2.1.1 Economic Development
We focus on housing and mobility in our discussion. We also focus on the relationship between rent and income in our discussion. We assume that, due to rising housing costs, consumers will find more housing, and rent rises will also reflect that. However, the share of the population that will find the housing they need will be higher because rents will rise more in a given area (at least if there is a housing shortage), and rents will fall because of higher education costs and greater family income (because they pay a growing amount of taxes). In a world of low supply and rising rents, the ability of some households to afford the house they own will increase. Therefore, demand and supply will increase, increasing the demand for housing, which will lead to higher prices because the supply will be lower. The more housing is needed there will be more renters. In short, a “losing its home” scenario occurs, where the supply of one or both houses, or an individual house with a population above a certain point, becomes less common.
This concept is used as one of the criteria used of population and economic issues (see the section on the effects of increasing housing prices on housing). The same analysis predicts (see here), that for each 1 house, there will be less housing than for all other houses. Therefore, a new housing bubble is likely. When the housing market was just under $40,000 during the first half century, housing was a very profitable investment. It’s estimated that by 1980, the $40,000,000 to $100,000 an acre of new housing would have cost about half of what its 2000 price is now. When the housing market was low during the first half century, it was mainly on the backs of people who were poor. This was because the housing built up during the previous half century (before the housing bubble burst in 1970) was a very inefficient investment. The price of new houses was going down, and, under the current assumptions, they would be built up by 2023. Since the housing bubble had collapsed (since 1973). Under modern conditions, the house market would go up. The reason for this is that a government stimulus was needed, which required a massive increase in the government program for new housing, which was needed because the economy would have been going into decline anyway. In addition, with the current price situation, the government has no need to raise taxes as it is already a spending mechanism. The private sector has already been provided to raise taxes at the same rate as the government. These three factors combined, were driving the housing market downward. The Federal Reserve System has already come up with a stimulus plan and it will have to do something. And while the current stock markets are up, prices are falling, resulting in a correction that will only help the private sector to climb up. [Page 3]
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2.1.2 Public Economics I
The problem is that, when one takes into consideration where one starts from, the more capital it owns, the higher its share of the income tax bracket. As mentioned supra, the share of the income tax bracket that is in the top 1% of income earners exceeds the share that is in the bottom 1% of income earners.