Eco/365 Macroeconomics: Supply And Demand By Eco 365

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Recommended: account on the merits and demerits of macro and micro economics

Supply and Demand
Alesha Lispett
ECO/365
April 7, 2014
Benjamin Zuckerman

Supply and Demand
Macroeconomics studies the economy as a whole, while microeconomics studies the individuals and business decisions regarding the prices and goods and services (Investopedia, 2009). Macroeconomics looks at government and industry standard, rather than individual economic decisions. Microeconomics focuses on supply and demand and forces that affect price in an economy. Monopolies, such as GoodLife in the simulation, are a macroeconomic concept, because they are a top down view of a firm’s control of the economy. A monopoly is a market structure where one seller completely controls the market prices and fears no competition because none exist due to the barriers of entry. Price ceilings and price floors also fall under the macroeconomic scope because they are imposed by governments on whole economies or markets. A price ceiling is legal limit imposed by the government on how high the price of a good can be. Conversely, a price floor is the legal limit imposed by the government on how low the price of a good can be. Supply and demand of individual apartments are a microeconomic concept because it focuses on one product and not an industry. Suppliers are more willing to supply at a higher price, to cover their increased cost.
During the simulation, price affected the shift in the demand and supply curves. Apartments were easier to rent at a lower price, but the supplier, Good Life, would incur additional overhead costs per apartment. They were not willing to rent at a rate that would eventually cause losses. The demand curve was shifted when a new company, Lintech Inc. moved into the area, increasing number of demanded apartme...

... middle of paper ...

... at large. The market receives increased demand for apartments when a new company moves into town, bringing new salaries and more potential customers.
The price elasticity of demand is a measurement that illustrates the responsiveness to changes in price of the demand. For example, it is specifically related to the simulation in regards to shifting the price up and measuring how much the demand falls. It is a percentage change in quantity. The presence of substitute goods, such as detached housing, has the effect of increasing the price elasticity of the demand. Housing is a necessity, which helps to hone down the elasticity. The revenue is maximized when the elasticity is equal to one.

Reference
Investopedia. (2009, February 26). What's the difference between macroeconomics and microeconomics? Retrieved from http://www.investopedia.com/ask/answers/110.asp

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