Supply And Demand

Economics for Business

Workshop #1

Introduction

Goodlife Management is a monopoly of Atlantis. Goodlife Management can alter the rental rate at their discretion to match the market. Goodlife Management utilizes the concepts of demand, supply, and equilibrium to determine how to manage the apartments while making the most money in the ever-changing market.

Demand

Demand is the amount of a good that consumers are willing and able to buy at a given price. (http://www.bized.ac.uk.stafsup/options/notes/econ207.htm) The factors that influence demand are: the price of the good, the income of consumers, the demand for alternative goods, which could be used (substitutes), the demand for goods used at the same time (complements); and whether people like the good (consumer taste). (http://www.bized.ac.uk.stafsup/options/notes/econ207.htm) Demand was a positive factor for Goodlife Management when the population increased. The demand for two-bedroom apartments increased and there was no affect in the supply of the apartments. Demand also was a negative influence for Goodlife Management. The demand was negative for Goodlife Management when the population preferred to purchase detached homes instead of rent an apartment. The negative demand meant there were less prospective tenants for the apartments, which caused Goodlife Management to lower its rental rate. As the rental rates decreases, the quantity of apartments also decreases.

Supply

Supply is the amount of a good producer is willing and able to sell at a given price. (http://www.bized.ac.uk.stafsup/options/notes/econ207.htm) Supply depends on: the price of the good, the cost of making the good; the supply of alternative goods the producer could make with the same resources (competitive supply); the supply of goods actually produced at the same time (joint supply); and unexpected events that effect supply. (http://www.bized.ac.uk.stafsup/option/notes/econ207.htm.) Supply also had positive and negative effects on Goodlife Management. When the quantity of the two-bedroom apartments supplied was more than the quantity of apartments that were demanded, Goodlife Management was able to supply more apartments than it had tenants. This has a negative effect because Goodlife Management must lower the rental rates to attract prospective tenants. If the rental rate is below equilibrium, the quantity demanded is more than you can supply, there will be a shortage in apartments and the tenants will be willing to pay more for the apartment, which is positive for Goodlife Management.

Equilibrium

Equilibrium