...Supply and Demand Simulation The simulation shows over the years, there are several changes to the population of Atlantis and thus the supply and demand of two-bedroom apartment housing. The changes in the supply and demand curves cause the equilibrium price to rise and fall. In the simulation, the price elasticity of demand affects both the customer’s decision to rent and the company’s pricing strategy. The principles of microeconomics and macroeconomics are both active in the simulation. Examples of microeconomics are the individuals and the GoodLife Company as they made choices because of scarcity and regulation. An example of macroeconomics is the economy-wide change of the government that places a price ceiling on apartments for GoodLife. The two examples of microeconomics classify as such because they have a limited effect on the organization or the individual in the economy. The government’s regulation of price ceiling classifies as macroeconomics because it has an aggregative effect on the economy. Individual consumer choice causes increases and decreases in demand that the company can respond to. The company can modify its price to achieve equilibrium in reaction to consumer demand. However, this is not the case when government sets regulation on product price. In the beginning of the simulation, when the company lowers its rate to $1,050 per month, the vacancy rate hits target level. At this price strategy, the company can fill vacancies for 1700 apartments, leading...
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...in Attachment 1 suggests that a decrease in demand for iron ore by Chinese steelmakers. Because attachment 1 mentions that price decrease which result in a decrease in demand for iron ore by Chinese. As shown in diagram 1 below, the price of steel dose down from P1 to P2, thus the quantity supplied of steel decrease from Q1 to Q2, which means there are less demand for iron ore. And the article also shows that an increase in the price of iron ore. Price increases leads to a decrease in quantity demanded of iron ore. And price goes up lead to a movement along the demand to the left. This also makes a decrease in demand for iron ore by Chinese. Therefore, demand for iron ore by Chinese makers decrease. . [pic] b) As the demand for iron ore by Chinese decrease, the demand curve shift to the left. The new equilibrium price lie on the demand curve D2(graph above) which is lower than original equilibrium price on demand curve D1. The decrease in demand will also cause a decrease in quantity demand traded from Q1 to Q2. The Baltic dry index is based on the equilibrium price. Therefore, the Baltic dry index will decrease. c) There are going doubts about what the Baltic Dry is actually signalling because the index change will caused by demand change or supply change or both of them change. For example, the index increase will be caused by the demand increase or the supply decrease or demand increase more obviously than supply decrease. Question 2 a) The information...
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...April 20, 2015 Market Equilibration Process Paper Economics studies supply and demand and what effects they have on everyday business. Supply and demand work together to paint a picture of market conditions for the business. Their cause and effects are called determinants. As determinants affect one it will also affect the other. To balance the cause and effects is to reach equilibrium. Searching for market equilibrium is essential because when a business does not have equilibrium we experience such issues as surplus or a shortage. This paper will explore the laws of supply, demand and their determinants and the quest for market equalization is it pertains to the business world. Demand is the downward sloping line and we must consider what happens as we move up and down the curve and what causes these changes, also known as determinants. For example, the demand for Internet service has been increasing steadily over the last few years. See below, the graph displays that as the quantity of demand shifts down the price moves in earnest down the slope. Some basic determinants that cause changes to the demand involve consumer preferences, number of buyers, consumer income, prices of related goods, and consumer expectations.(McConnell, Brue, & Flynn, 2009) As we think about demand we must also consider the two types. There is a change in demand and a change in quantity demanded. The change in demand will shift our line from the left to right or vice versa. However, if...
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...ECW2731 Managerial Economics Lecture 2: Demand & Supply 1 Outline • Lecture objectives: Demand Supply Market Equilibrium Comparative Statics • Unit objectives: Recognize and evaluate the various theories of the organisation Understand and analyze firm pricing strategies 2 Market Demand Demand is the quantity of a good or service that customers are willing and able to purchase during a specified period under a given set of economic conditions. Determinants of Demand Demand is determined by prices of other goods, income, expectations of price changes, consumer tastes and preferences , advertising expenditures and so on. 3 Basis for Demand • Direct Demand – Demand for personal consumption products. – The demand for products that directly satisfy consumer desires. – The value or worth of a g&s, its utility, is the prime determinant. 4 Basis for Demand • Derived Demand – Demand for all inputs is derived demand input demand. – Determined by the profitability of using various inputs to produce output. 5 Basis for Demand • Industry Demand Versus Firm Demand – Industry demand is subject to general economic conditions. – Firm demand is determined by economic conditions and competition. 6 Market Demand function 7 Demand Curve Demand Curve Determination –Demand curve shows price and quantity relation holding everything else constant. Change in Quantity Demanded –Quantity demanded falls if price rises. –Quantity demanded rises...
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...Supply and demand 1. Demand and factors influencing it. The law of demand Demand is an economic category, which characterizes the requirement of buyers for a particular product, provided with sufficient means of payment that allows you to purchase the goods at a certain price in a given time period for a particular market or in a particular country. Distinguish individual and aggregate demand. Individual demand is the demand of a specific buyer on a specific product, and in this market. Aggregate demand is the total demand for goods and services in any country. Also there are primary and secondary demand. Primary demand is demand for the product or services a specific category of goods in General. For example, it may be the demand for coffee or the demand for insurance services. Secondary (or selective) demand is the demand for goods of a certain brand or company for services of a certain type. Additionally, the demand is negative, the absent, the latent (potential), full, over, falling (falling), the fluctuating, irrational, rush (avalanche). Negative demand is the demand that occurs in cases when consumers "dislike" the product and avoid its purchase. The missing demand is the demand for the goods that are unnecessary in the market or obsolete. Latent demand is the demand expected in the future, the demand of potential buyers. Full demand is the desired demand exactly the relevant production possibilities and policy of the manufacturer of the product or service. Excessive demand...
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...referred to as an increase in demand. Increased demand can be represented on the graph as the curve being shifted to the right. At each price point, a greater quantity is demanded, as from the initial curve D1 to the new curve D2. In the diagram, this raises the equilibrium price from P1 to the higher P2. This raises the equilibrium quantity from Q1 to the higher Q2. A movement along the curve is described as a "change in the quantity demanded" to distinguish it from a "change in demand," that is, a shift of the curve. In the example below, there has been an increase in demand which has caused an increase in (equilibrium) quantity. The increase in demand could also come from changing tastes and fashions, incomes, price changes in complementary and substitute goods, market expectations, and number of buyers. This would cause the entire demand curve to shift changing the equilibrium price and quantity. Note in the diagram that the shift of the demand curve, by causing a new equilibrium price to emerge, resulted in movement along the supply curve from the point (Q1, P1) to the point Q2, P2). If the demand decreases, then the opposite happens: a shift of the curve to the left. If the demand starts at D2, and decreases to D1, the equilibrium price will decrease, and the equilibrium quantity will also decrease. The quantity supplied at each price is the same as before the demand shift, reflecting the fact that the supply curve has not shifted; but the equilibrium quantity and price are different...
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...Extensions of Demand and Supply Analysis The Price System (market system): an economic system in which relative price change to reflect changes in supply and demand. In fact prices are the signals whether the resource is relatively scarce or abundant. Market is the exchange arrangements of both buyers and sellers under the forces of supply and demand The majority of exchanges are voluntary exchanges in markets. Voluntary exchange: is the act of trading between individuals to make both parties better off. The term of exchange is usually the price paid for desired products and is determined by supply and demand Transaction costs: the costs of negotiating and enforcing contracts, acquiring and processing information about alternatives. This means all the costs involve with the exchange. Some of the effects of the market mechanism * Prices are determined by the forces of demand and supply and provide signals about what should be bought and what should be produced. * Resources are used to their highest-valued uses by means of prices * Transactions costs are reduced because the organized markets imply lower transaction costs * Using the role of specialized individuals (middlemen) facilitates Exchange activities, which brings the buyers and sellers and therefore lowering transaction costs. The impact of Changes in demand with supply stable: - Increase in demand holding supply curve constant means that when demand curve shifts from D1 to D, equilibrium price increases...
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...Thammathorn Turnjaiton ECO 550 REVIEW OF THE BASICS: Managerial Economicsapplies relevant micro and macro economic theory using different analytical tools (including statistical tools, basic algebraic and graphing tools, computer software like EXCEL,...), to business problems, whilst developing general principles that can be applied to the business decision-making process. These exercises are therefore intended to help prepare you review some of those basic algebraic tools that might have been forgotten. Please do not be intimated. You will find them easier than you think. The same is true of the basic economics principles. Please answer all questions. Answers are to be posted in the DROP BOX at the end of Week 2. (That means, you have two weeks to complete them). 1) Solve: x + 79 = 194 x = 115 2) Solve: x - 56 = 604 x = 660 3) Solve: 6x = 36 x = 6 4) Solve: x / 5 = 10 x = 50 5) Solve the Problem: 6/1÷ 2/3 = 9 6) Problem: 3/4 * 6/7 = 0.642 7) Graph: y = 2x + 1 (use values of X= 0,1,2,-1) (0,1) (1,3) (2,5) (-1,-1) 8) Simplify: (-5)^3 = 125 9) Simplify: -33 - (-3)2 + (-2)2 = -31 10) Opportunity cost is best defined as: A) The amount given up when choosing one activity over the next best alternative. B) The opportunity to earn a profit that is greater than the one currently being made. C) The amount that is given up when choosing an activity that is not as good as the next best alternative. D) The amount given up when...
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...Supply and Demand Simulation XXXXX XXXXXXX ECO/365 November 12, 2012 XXXX XXXXXX Supply and Demand Simulation The scenario of Atlantis, the perfect city in somewhere, United States, provides an excellent opportunity for students to learn how to apply supply and demand concepts for two-bedroom rental apartments. Atlantis is a city that anyone would love to live in with its ideal everything, but even with two very experienced managers from Goodlife Management, there were a few challenges to overcome as situations and factors changed, affecting supply, demand, and equilibrium. Decisions were made with the ever-changing requirements to look at demand and supply curves while considering how they shift, and the impact of a price ceiling on quantity demand and quantity supplied for these two-bedroom rented apartments. The scenario also provides the opportunity to consider how it may apply to a real-world product or situation in the workplace and how price elasticity of demand affects a consumer’s purchasing and a firm’s pricing strategy. During this scenario there were instances in which the price was reduced to meet a 15% vacancy rate and the other where the price was increased to rent out all the apartment units. In both instances, regardless if the price were changed downwards or upwards, the quantity demanded and supplied changed for a movement along the curve. There was also some non-price change factors that caused shifts of the curves, the announcement of...
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...Market equilibrium is the point in which industry offers goods at the price consumers will consume without creating a shortage or a surplus of goods. Shortages drive up the cost of goods while surpluses drive the cost of goods down, finding the balance in the process is market equilibrium. In today’s economic environment there are varying array of contributors affecting market equilibrium. Some of these contributing factors are the ever changing technology, changes in supplies, and the change in consumer preferences. Any shift in these factors will affect the economic market, which will cause changes in various areas, thus resulting in significant shift in market equilibrium (McConnell, Brue, & Flynn, 2009). Reaching market equilibrium means being able to satisfy both the buyers and sellers, and on a graph, it reflect the intersection of demand and supply. Keeping the consumer satisfied in the long-term is a challenge. In the current economic environment, businesses are ensuring the resources are used proficiently and successfully, this is done through periodic assessments to ensure the company can benefit from the consumers and their changing preferences. This process would generate a precise pattern of the customer’s choices such as taste, technological alternatives, and amount of available resources, which would become outdated and ineffective (McConnell et al., 2009). My experience with the market equilibrating process is easily found in my personal financial debts and...
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...Market Equilibrium within the Oil Market Professor Uhimchuk Eco 100 November 3, 2013 In the article titled “Oil Market equilibrium fragile, says think tank”, the author speaks about the fragile state that oil prices are reaching and countries within Europe as well as the United States are looking for other means to produce oil rather than paying the high cost of oil barrels. By looking for alternatives to the traditional oil, the oil industries have been raising the price of the barrel to help compensate for the demand leveling out and not rising as it would normally. According to CGES “The world is increasingly burning fuels than oil to generate power, leaving transportation as the only area where there is still no large scale alternative to oil.” With the transportation industries still depending on traditional fuel supplies, the oil industry can depend on the consumers continuing demand for their source of oil. Leo Drollas who is the Chief Economist for CGES, talks about his interpretation of the equilibrium of oil among China, Europe and the United States. While Europe has steadied out and their demand for crude oil hasn’t risen nor has it fallen, China’s demand for it has continued to grow, but he also states that this doesn’t necessarily mean that they are having a growing demand for it, but that they could just be storing it for future use. The consumption and demand between these three powerhouses are “considered the catalysts for a global recovery.” (Drollas)...
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...Market Equilibrium Understanding market equilibrium and how to maintain market equilibrium is essential for all business leaders. Market equilibrium is the point at which the demand of the consumers is equal to the supply of the producers. The goal of all organizations is to ensure their output is at market equilibrium, therefore having no surplus or shortage. However, many factors can affect a both demand and supply of a product. This paper will look at the factors which have caused a shortage of bacon and thus changed the market equilibrium. The law of demand states, that all other things being equal, as price falls the quantity demanded rises, and as price rises, the quantity demanded falls. Concurrently, the law of supply states that as price rises the quantity supplied rises, and as price falls, the quantity supplied falls. Additionally, the law or scarcity tells us that for any given period of time we have a finite or scarcity or resources to allocate our unlimited wants. What does this have to do with bacon? Scarcity. As we continue to utilize alternative resources for fuel, many car manufacturers have begun to use ethanol, which is derived from corn. Additionally, an abnormally hot summer has led to shortage of corn. These factors, along with others have led to a shortage of corn; which is used to feed pigs. Less feed for pigs results in smaller pigs. Thus, the shortage of corn has led to a shortage of bacon. A shortage in bacon supply has created a minor...
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...In a labor market, the supply refers to the employees or the labor class and demand refers to the employer willing to hire these employees on a certain wage. In a labor market, equilibrium is reached when the employers are willing to hire all the number of employees on the wages these employees/labor are seeking and so the consensus is reached between the demand and the supply of labor. Labor market equilibrium behaves in a way similar to any demand supply equilibrium. The supply increases from many factors such as if the wages rise or the population increases. Similarly, the demand is affected by the factors such as unit cost per labor and economic situation and the workforce changes. The interesting fact here is that though the market always tends to achieve the state of equilibrium, but it never actually achieves it for long since the market conditions and workforce attitudes and society values are always changing. For example, women today are more a part of the labor workforce than they were a decade ago and it is still increasing. And such changes in the attitude and beliefs in society affect the supply and demand of labor too. Also, the fact to note here is that the demand of labor is created by the firm who manufacture goods or provide services and these are the firms that play a role to decide the per unit labor wages and have a role to play in achieving the labor market equilibrium. And to achieve this equilibrium, these firms make sure that the marginal cost to hire...
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...market with model of market demand, supply, and equilibrium price and quantity. The term statics alludes to the theoretically stable point of equilibrium, and, comparative refers to the comparison of the various points of equilibrium. This method of analysis proceeds as follows: 1. State the assumptions needed to construct the model. 2. Begin by assuming the model is in equilibrium. 3. Introduce a change in the model. In so doing, a condition of disequilibrium is created. 4. Find the new point at which equilibrium is restored. 5. Compare the new equilibrium point with the original one. * Short-Run Market Changes: The “Rationing Function” of Price The short-run itself is a period time in which sellers already in the market respond to a change in equilibrium price by adjusting the amount of certain, resources which economists call variable inputs. Examples of such inputs are labor hours and raw materials. A short-run adjustment by sellers can be envisioned as a movement along a particular supply curve. It also a period of time in which buyers already in the market respond to changes in equilibrium price by adjusting the quantity demanded for a particular good or service. A short-run adjustment by buyers can be envisioned as a movement along a particular demand curve. Short-run market changes formed a new market equilibrium price from the old one. The analysis is as follows: * An increase in demand causes equilibrium price and quantity to rise....
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...| Supply and Demand Simulation Nivea E. Martinez Ramirez University of Phoenix ECO/365 Principles of Microeconomics April 1st, 2014 Professor Evaristo Medina-Irizarry The assignment will analyze and summarize the Supply and Demand simulation from the student website. The purpose is to recognize two microeconomic and two macroeconomic principles included in the simulation and to explain why these principles are categorized as macroeconomic or microeconomic. The paper will also identify at least one shift of the supply curve and one shift of the demand curve from the simulation, including an explanation of why these shifts happen. In addition, analyzed for each shift, their impact on the equilibrium price, quantity, and decision making. Subsequently, it will mention different ways in which concepts about supply and demand can be useful in the workplace and in real life-situations. The paper will also discuss ways in which models of microeconomics and macroeconomics benefit in understanding aspects that affect changes in supply and demand on the equilibrium price and quantity. Finally, the paper will include an explanation on how the price elasticity of demand affects the consumer’s purchasing and on the firm’s pricing strategy. Microeconomics models presently in the simulation are: supply and demand. The simulation refers to the supply and demand of rentals apartments in a small city of Atlantis, including the factors. At the same time, it shows the impact...
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