...The Law of Supply and Demand ECO/365 The Law of Supply and Demand Understanding the laws of supply and demand are central to understanding how the capitalist economy operates. Since we rely on market forces instead of government forces to distribute goods and services, there must be some method for determining who gets the products that are produced. This is where supply and demand comes in. By themselves the laws of supply and demand give us back basic information, but when combined together are the key to distribution in the market economy which is price. The law of supply and demand is defined as the common sense principle that defines the generally observed relationship between demand, supply, and prices. As the demand increases the price goes up, which attracts new suppliers who increase the supply bringing the price back to normal. However, in the marketing of high price (prestige) goods, such as perfumes, jewelry, watches, cars, liquor a low price may be associated with low quality, and can reduce the demand. One function of markets is to find “equilibrium” which is prices that balance the supplies of and demands for goods and services. An equilibrium price which is also known as “market clearing” is one at which each producer can sell all he wants to produce and each consumer can buy all he demands. Naturally, producers always would like to charge higher prices, but even if they have no competitors, they are limited by the law of demand. If producers insist...
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...1. The law of demand holds because it is based on common sense. The Law of Supply can be observed as demand comes from real people and exists in our day to day experiences, regardless of income or social status. 2. a. Change in quantity demanded refers to the amount of a good a person can buy as the price of the good changes. This is characterised by movements along the demand curve. Change in demand: when a factor other than price is responsible for an increase or decrease in the amount of a good that a person wishes to purchase. This is characterised by a shift in the demand curve. b. Normal Good is a product for which, ceteris paribus, an increase in income results in an increase in demand. Inferior Good is a product for which, ceteris paribus, an increase in income results in a decrease in demand. Substitute: refer to two goods, where an increase in the price of one good leads to an increase in the demand for the other. Compliment: refers to two goods, where an increase in the price of one leads to a decrease in the price of the other. An shift to the left of a demand curve can be seen when there is a decrease in demand, caused by Lower income, Complimentary goods, a decrease in population, Government policy such as taxation, seasonal factors and tastes. A shift to the right of a demand curve can be seen when there is an increase in demand, caused by higher income, Substitute goods, an increase in population, Seasonal factors, Consumer expectations and tatses. ...
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...A Porcupine named Fluffy When Mr. and Mrs. Porcupine had their first child, they were delighted. Now he needed a name. Should they call him Spike? No. Spike was too common. Should they call him Lance? No. Lance sounded too fierce. Should they call him Needleroozer? No Needleroozer was too… Long. Prickles? Pokey? Quillan? Then together they had an idea. Aha!! “Let’s call him Fluffy. It’s such a pretty name. Fluffy!” But soon there came a time when fluffy began to doubt that he was fluffy. He first became suspicious when he backed into a door and stuck fast. That was not a fluffy thing to do. He was more convinced when he accidentally slept on his back and poked holes in the mattress. A very unfluffy thing to do. When he tried to carry an umbrella he knew the truth without a doubt. Fluffy definitely wasn’t. So he decided to become fluffier. “Clouds are fluffy,” he thought. “I’ll be a cloud.” But he couldn’t stay up. “I know pillows are fluffy!” He said “I’ll be a pillow.” But when his mother sat on him, Ouch! Ouch! Ouch! she was not pleased. He tried soaking in a bubble bath for forty-five minutes, but he did not become fluffy he became soggy. He tried whipped cream. He put a little on each quill. It was not easy, and it took more than half a day. But this did not make Fluffy fluffy. “They should have named me Gooey,” he sighed. He ate a lot of fluffy marshmallows. He rolled in shaving cream and feathers. He even tried to become a bunny. But the truth remained Fluffy wasn’t...
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...Supplemental Unit 1. Demand, Supply, and Adjustments to Dynamic Change Note: The authors recommend that this feature be read along with Part I, Elements 6, 7, and 11 of Common Sense Economics. Common Sense Economics highlights how markets work and their impact on the allocation of resources. This feature will investigate this issue in more detail. It will use graphical analysis to analyze demand, supply, determination of the market price, and how markets adjust to dynamic change. Demand The law of demand states that there is a negative relationship between the price of a good and the quantity purchased. It is merely a reflection of the basic postulate of economics: when an action becomes more costly, fewer people will choose it. An increase in the price of a product will make it more costly for buyers to purchase it, and therefore less will be purchased at the higher price. The availability of substitutes—goods that perform similar functions—underlies the law of demand. No single good is absolutely essential; everything can be replaced with something else. A chicken sandwich can be substituted for a cheeseburger. Wheat, oats, and rice can be substituted for corn. Going to the movies, playing tennis, watching television, and going to a football game are substitute forms of entertainment. When the price of a good increases, people will turn to substitutes and cut back on their purchases of the more expensive good. This explains why there is a negative relationship...
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...Microeconomics and the Laws of Supply and Demand Eco 365 Instructed by: The purpose of this paper is to review and discuss how the principles of both macroeconomics and microeconomics are pertinent to many aspects of our daily lives in ways that a mass majority of individuals has never stopped to think about. The discussion herein is based on a simulation involving rental apartments in Atlantis that are all owned by the same company known as Goodlife. It is important to anyone individual or company in their growth to know when to know what a good price is, when to spend money, when to save money, and what to do in between, and to do so you must understand the concept of supply and demand and how to utilize the information. Most people understand the basic aspects of this; however, to be effective one must know the importance of how both macro and microeconomics are to our ways of living. Further at it relates to the simulation, discussions in this paper will consist of identifying both a supply and demand curve and explain what happens when a shift takes place as well as their different areas of impact. Lastly, I will discuss price elasticity and how a persons spending. Macro and Microeconomic Principles Here is a quick review of two important terms and definitions. Pursuant to Colander (2013), “Macroeconomics is the study of the economy as a while” and “Microeconomics is the study of how individual choices are influenced by economic forces”...
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...the Laws of Supply and Demand In this paper we will be discussing the law of supply and demand. First of all, what is demand curve? Demand curve is the graphical representation of demand that shows the quantities consumers are able and willing to buy at various prices. A normal demand curve is downward sloping in accordance with the law of demand. Supply curve is also a graphical representation of supply that shows the quantities producers are able and willing to sell at various prices. A normal supply curve is upward sloping in accordance with the law of supply. Equilibrium is a state of balance where dynamic forces have canceled each other out and there is no tendency for change. The laws of supply and demand are the ones that determine our economy today. During the simulation it showed that the numbers affect dramatically towards the economy. “ For example, if the demand curve shifted to the left, it would show a decrease in demand from consumers and cause fewer apartments to be filled.” (Supply and demand Simulation, Linda R, July 21,2014) In this situation what happened is that due to a widespread desire of having property ownership and been forced from the management company to lower their prices for them to compensate. Equilibrium price becomes lower because the demand decreased, while the supply and the quantity remained the same. “If the supply curve were to shift to the right, it would indicate an increase in available apartments rent.” (Supply and demand Simulation...
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...Microeconomics and the Laws of Supply and Demand To purchase this visit here: http://mindsblow.us/question_des/MicroeconomicsandtheLawsofSupplyandDemand/2779 Contact us at: help@mindblows.us Complete one of the following options: Option 1: Complete the Supply and Demand Simulation. Write a 1,050- to 1,400-word paper summarizing the content of the simulation and address the following: Identify two microeconomics and two macroeconomics principles or concepts from the simulation/video. Explain why you have categorized these selected principles or concepts as microeconomics or macroeconomics. Identify at least one shift of the supply curve and one shift of the demand curve in the simulation/video. Explain what causes the shifts, and how each shift affects the price, quantity, and decision making. Include responses to the following: How might you apply what you learned about supply and demand from the simulation/video 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 price 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? How does the price elasticity of demand affect a consumer's purchasing and the firm's pricing strategy as it relates to the simulation/video? Cite a minimum of 3 peer...
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...Microeconomics and the Laws of Supply and Demand Nicholas Perry ECO/365 May 26, 2014 Tarron Khemraj Microeconomics and the Laws of Supply and Demand In the Supply and Demand Concept Simulator, there were several microeconomic and macroeconomic principles covered. Also, there were shifts in the supply or demand curve throughout the simulator, and I will explain the shifts in greater detail. To understand what microeconomic principles were used in the simulator, understanding what microeconomics means is important. Microeconomics is the study or analysis of the economy or market on an individual or business level. It focuses on individual buyers and sellers within businesses. One example from the simulator of microeconomics is when Susan asked me to decrease the vacancy rate to 15 percent. In order to do this, I must decrease the cost of the apartments to try and increase the demand or interest in vacant apartments. The reason this is microeconomics is because the decision a decision made on an individual level and has to do with the buyer and seller only to benefit my business. Susan later asked me to lease out all 2,500 available two-bedroom apartments available. In order to do this, Hal suggest we raise the monthly rental cost for the two bedroom apartments so we can cover the maintenance cost. We have to do this in order to stay profitable. This is microeconomics because again, it is focused around the buyer (renters) and the seller (GoodLife Management). The...
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...Microeconomics and the Laws of Supply and Demand Heather Prince ECO/365 February 16, 2015 Paul Palley Microeconomics and the Laws of Supply and Demand During this week’s homework, we completed a simulation regarding supply and demand. In this simulation, we learned how to change the rent amount on apartments to effectively earn profits during different situations. This helped us to learn how we would handle different situations that can arise when owning a rental company. This simulation showed scenarios related to microeconomics and macroeconomics. The two microeconomic situations that I came across in this simulation were when the company Lintech, Inc moved to Atlantis and when Lintech, Inc.’s employees incomes increased. I determined that these situations were related to microeconomics because they were changes in how the consumers and producers needs and wants. In both these situations, it was how the economy for that particular place was affected. The macroeconomic situation that I came across in this simulation was when the government imposed a price ceiling of $1,550. I determined this to be a macroeconomic situation because it was an effect on the economy because of a federal government change. The federal government imposed the price ceiling and it was not directly from the consumer or producers changes. A shift in the supply curve happens when the quantity supplied is increased as the price increases. In the scenario, this occurred...
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...November 24, 2014 Microeconomics and the Law of Supply and Demand The Supply and Demand simulation concept is essential to understand the effects of pricing and availability to consumers on real world commodities. This simulation captures the impact of different scenarios and situation of the property management company, Goodlife Management in the city of Atlantis. In the scenarios and based on the situations that occurred, these factors influences the equilibrium such as adjusting the rental rate of the apartments to maximize revenue. An attempt to increase the price to ensure a sufficient number of apartments to be rented to satisfy the demands, and making modification to the firm's trend from rental apartments to homeownership in order to meet the needs of a growing population due to Lintech Inc (University of Phoenix, 2014). Macroeconomics VS. Microeconomics In the simulation, the concepts of both, study of Microeconomics and Macroeconomics, are examined. Macroeconomics focuses on factors that affect the economy as a whole (Colander, 2013). In the scenario where Lintech company was introduced, the changes led to the whole economy of the city of Atlantis, not just the financial situation of Goodlife Management firm. The firm perceived the increase of residential demands due to the company workers that relocated in the area. However, in the scenario, when the firm increased the rental price due to the foreseen increase of demand of more apartments need to be rented, Goodlife'...
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...Microeconomics and the Laws of Supply and Demand Terry Cerami ECO/365 September 21, 2015 David Flesh Microeconomics and the Laws of Supply and Demand Utilizing the supply and demand simulation ("University Of Phoenix", 2014), I will illustrate two macroeconomic and two microeconomic principles demonstrated in the simulation and expound on why these principles are categorized as microeconomic or macroeconomic. Also, one shift of the demand curve and one shift of the supply curve from the simulation will be identified with explanations for the shifts. Further, I will analyze the influence on decision making in correlation with quantity and the equilibrium of price and how these concepts of demand and supply can be pragmatic in everyday business or within the current work environment. Finally, I will explain how price elasticity of demand has an immense impact on products pricing strategy and its purchase from the consumer. Macroeconomic and Microeconomic Principles The first macroeconomic principle demonstrated within the Supply and demand Simulation is Price Ceilings. Price Ceilings ensue through legislation as laws are enacted establishing a lawful ceiling of how high the cost of a product can be ("Price Ceilings", n.d.). When a price ceiling is established, there is further demand than what is available at the equilibrium price. This is a result of there being a sufficient supply in quantity of demand than supplied quantity. For example, in the simulation the...
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...Microeconomics and the Laws of Supply and Demand The first microeconomic policy that I noticed in this simulation, was the company GoodLife's decision to try and reduce their rental vacancy rate while still increasing the revenue. This is a microeconomic concept because it focuses solely on the company's revenue and profit and does not take a look at how this will affect the bigger picture. By decreasing the price of rent at their apartments, they are increasing the quantity of rooms demanded. This in turn increases revenue because less apartments are empty. Another example of a microeconomic concept that is demonstrated in this simulation can be shown by GoodLife's decision to try and rent out all of their rooms. When they do this they actually have to increase the price of rent. The reasoning for this is because the more rooms that are rented out the more maintenance the company has to keep up. This is a good example showing that as you increase the price of the apartments, the number of apartments supplied to prospective clients also increases. A macroeconomic concept can be seen when the city of Atlantis begins to change and many more new companies move into the town. With the rise of the population, the city is beginning to notice more congestion in the town and a lack of housing. This is a macroeconomic concept because it the lack of housing is affecting the entire town's economics. The city also has plans on regulating the price of rent which can make it harder...
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...Microeconomics and the Laws of Supply and Demand ECO/365 October 15, 2014 University of Phoenix Microeconomics and the Laws of Supply and Demand This assignment calls for the students to complete the Supply and Demand web simulation. The simulation is about a property management firm called Goodlife Management, who owns apartment complexes in the city of Atlantis. The simulation provides a number of different scenarios both covering information that we learned about microeconomics and macroeconomics. Identify two microeconomics and two macroeconomics principles or concepts from the simulation. Explain why you have categorized these principles or concepts as microeconomics or macroeconomics. Microeconomics affects the immediate supply and demand of the company. In the first scenario, GoodLife has 2,000 apartments in its apartment complexes, with a 28% vacancy rate. Susan recommends reducing the rate to 15% while maximizing revenue. We achieved this goal by reducing the rental rate, getting more occupants to move in the apartments, which maximized our revenue. The next scenario, GoodLife has 2,500 apartments available on a temporary month-to-month basis at the rate of $1,100. Susan suggests that we lease out all 2,500 apartments. Though possible to lease all apartments, we are unable to do so at the current rental rate due to the fact that maintenance cost will rise as the tenant and apartment rate rise. So, we raised the rental rate to $1,550 to compensate for...
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...Microeconomics and the Laws of Supply and Demand Your NAME ECO/365 July 6, 2015 INSTRUCTOR NAME Microeconomics and the Laws of Supply and Demand The simulation showed how a shift in the supply curve or the demand curve can lead to significant changes to the economic standing of the business. When the demand curve shifts downward or to the left it showed a decrease in demand from renters thus yielding less apartments rented. This happened when the new company who moved into the area had a higher focus in ownership rather than renting, this forced the management company to have to lower prices to compensate for the decrease in demand. This shift cause the equilibrium price to be reduced due to the lower demand, however supply and quantity remained constant. Supply and Demand Curve Shifts When the supply curve shifts up or to the right it indicates an increase in the number of apartments available for rent. This situation occurs when the management company expanded its buildings to make room for more units. If we assumed that the demand remained, the thing to do would be to lower the rental costs to increase occupancy, this was done twice during the simulation once when Susan suggested that vacancy rate be lowered to 15% and once again when she suggested it be lowered to zero. This could have led to increase in profits should there have been sufficient demand to achieve full occupancy rate for all the apartments being provided. The management company must base its...
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...the Laws of Supply and Demand Vanessa Rodriguez Week 2 ECO/ 365 Professor Johnson What is economics? Some might say that economic is the stock market meanwhile others say it’s “my way of living”. Our Economics textbook defines economics as the study of how human beings manage their wants and needs. For an instant, I want a pair of new leather boots, but I need to pay my rent. My decision of paying my rent instead if of purchasing a new pair of leather boots illustrations that prioritizing my needs before any of my desires. The theory of economics is divided into two individual categories known as the microeconomics and macroeconomics theories. Microeconomics theory teaches of how individual choice is influenced by economics forces. Example, the high prices of the new IPhone6, is based on the how many people want or are willing to buy them. Then there is macroeconomics, which is the study of the whole economy. Such as the inflations problem that is seen on a daily basis and rising unemployment rates throughout the country. When speaking of microeconomic discuss main principles one of which is explain in details in weeks two simulation. This concept is known as supply and demand. These principles describe how the price and quantity rely on one another. First and foremost, is the Law of Demand. This law states that quantity demand increases as price fall, other things constant. And vice versa when quantity demanded decreases as price rises. We can graph the demand on...
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