- For each shift, analyze how it would affect the equilibrium price, quantity, and decision making.
- 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?
- How do the concepts of microeconomics help you understand the factors that affect shifts in supply and demand on equilibrium prince and quantity?
- How do the concepts of macroeconomics help you understand the factors that affect shifts in supply and demand on the equilibrium price and quantity?
Explain how the price elasticity of demand affects a consumer’s purchasing and the firm’s pricing strategy as it relates to the simulation.
Microeconomics, Macroeconomics and the Laws of Supply and Demand – Sample Answer
Upon the completion of the simulation titled “Applying Supply and Demand Concepts”, several economics concepts, or principles, were made put. The microeconomics concepts made out in the simulation were demand’s price elasticity along with the connection between supply and demand. The macroeconomics ones were supply and demand-related shifts as well as price limits, or ceilings. The demand’s price elasticity along with supply and demand concepts were deemed microeconomic since they relate to analyses that focus on constituent elements rather than wholes.
Read also Economic Factors Affecting Demand and Supply of Commodities and the Resultant Price
In a typical market, demand for given products goes up as their prices fall. The supply of given products lessens as their prices lessen (Prasch, 2008). When an economy is taken as a whole, the supply forces in it and the related demand forces are some of its constituent elements. The elements impact on, and shape the whole. The shifts and the ceiling relate to analyses that focus on the whole prior to focusing on its constituent parts. Macroeconomists consider the shifts and ceilings to be the larger external factors, or realities, affecting smaller, inner elements in given economies (Campuzano & Mula, 2011).
Shifts in Supply and Demand Curves
In the simulation, the curve representing demand sloped downwards. That showed that increasing prices lessen the related demand, and increasing demand lessens the related prices. In the simulation, the curve representing supply sloped downwards. That showed that increasing prices increased the apartments available for renting out, and increasing demand lessens the related prices. The curve showed that the increase of the apartments was likely to force reductions in the rental rates. As well, the curve demonstrated that the apartments’ supplier could have attracted more renters than he or she was doing by reviewing the rates downwards. On the other hand, he curve demonstrated that if apartments’ supplier reduced the number of available apartments for renting it out the rates would be pressurized upwards. From the simulation, it is clear that the supplier could maintain a favorable equilibrium and expand his or her market share by reviewing the rates upwards
Read also Supply and Demand in a Global Market – Answered
As noted earlier, in the simulation, the supply, as well as demand, curves shifted owing to varied factors. The evident factors included population along with management changes. Another factor was renter preference changes. In the simulation, a change in the preferences of the prospective renters saw the apartments’ demand drop over time. When the apartments’ supplier converted then into condominiums available in the market, it posted reductions in their demand as well as supply, making the curves representing them shift leftwards.
The simulation was defined by several instances of shifts in demand, as well as supply, curves. Suppliers are incentivized by increased prices to increase their delivery of given products to particular markets. Consequently, the increase of rental rates motivated the supplier who was the subject of the simulation, to lease more apartments than he would have leased if the rates remained constant or lessened. Characteristically, the shift can be attributed to increasing maintenance or even production expenses, which would mean every extra apartment leased out would be at a higher rental rate than the preceding one.
Read also Relationship Between Supply Chain and Supply and Demand Model
With the rise of the rates, the supplier would be motivated to supply extra apartments, thus the upward slanting of the supply curve. In the simulation, the curve showing demand shifted owing to population expansion, or growth. That was regardless of the actuality that the apartments’ supply remained unchanged (Campuzano & Mula, 2011). At any particular rental charge, or rate, the expansion of the population within the area where the apartments are located should increase the demand for them automatically. That explained the shift in the curve showing demand for the apartments during the simulation.
From the curves done in the simulation it was clear that demand along with supply is affected by several factors. Simulation can be employed to determine and project the extent to which the factors affect them. For instance, the factors that impacted on demand along with supply of the apartments could have included their availability and related demand, the availability of prospective renters as well as pricing. It was easy to conceptualize the effects of these factors from the simulation.
Read also How Supply of Money and Demand for Money Determine Rate of Interest
Each of the curve shifts in the simulation impacted on the apartments’ equilibrium price (EP). For instance, the outward supply curve shift meant that more supply of apartments in the market was nonexistent. Had the apartments’ demand remained constant, the EP would have reduced, attracting more and more renters to the market to enjoy the reduced rates. The reduced rates may push some suppliers to leave the market, bringing about a new price, and supply along with demand equilibrium in the market. The expansion of the population would occasion the shifting of the curve representing demand outwards, raising the rates, and attracting more suppliers to the market to enjoy the increased rates (Aryeetey, 1994; Loewen & Jensen, 2004). The increased rates would encourage additional suppliers into the market, bringing about a new price, and supply along with demand equilibrium.
If the demand for a particular technical education remains constant, its providers may reduce the fees charged for it. That would reduce the related EP, attracting more and more persons to enroll for it. The reduced fees may push some of the providers to leave the market, bringing about a new price, and supply along with demand equilibrium in the market. A growth in the number of persons qualifying for the technical education would occasion the shifting of the curve representing demand for it outwards, raising the rates, and attracting more of its providers to the market to enjoy the increased fees. The increased fees would encourage additional providers into the market, bringing about a new price, and supply along with demand equilibrium (Anderson & Rand Corporation, 1975; Prasch, 2008).
You can order a plagiarism free answer at an affordable price.