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Pricing strategies economics unit 3
Pricing strategies principles
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Supply and Demand Simulation
Supply and demand plays an intricate role in the amount, price, and availability of products and services. The applying supply and demand concepts simulation guides users through making decisions for Goodlife, a management company for 2 bedroom apartments in Atlantis. The simulation names the user the property manager; responsible for vacation residents, new pricing for units, and advertising. The property manager makes decisions in circumstances including the changing of supply cure, demand curve, microeconomics, macroeconomics, and the equilibrium of price and quantity. All of these decisions move the business along as conditions change around it.
Demand Curve Shift
Lintech Expansion
The demand curve follows a distinct line unless some other factor causes the line to shift. The demand curve operates under the principle if the demand goes up the price goes down, and likewise if the demand goes down the price goes up as long as all other things are constant. A shift in the demand curve indicates something is not constant. In the simulation, a company named Lintech expanded its operations to Atlantis. The expansion increased the population of Atlantis changes the demand for apartments, but does not change the supply of apartments in the area. The sudden shortage of apartments created a demand curve shift. The shift permits Goodlife to offer a higher price for their 2 bedroom apartments, and still be able to fill the same number of units. By increasing the price, Goodlife brought the price and quantity available back into equilibrium (University of Phoenix, 2014).
Detached Homes
A few years later, the market shifted and people became more interested in detached homes than apartment homes. Once again, Go...
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.... Supply and demand are not a constant, but an ever-changing model. As the supply and demand curves changed and shifted, Goodlife adapted prices and quantity to match. This scenario is easily adapted to many different aspects of supply and demand. Prices are constantly changing on the products, services bought every day, and supply and demand drove those prices.
References
McGaughey, C. (2004, July 12). Price elasticity: From tires to toothpicks. Retrieved from http://www.econedlink.org/lessons/index.php?lid=551&type=educator
Saylor. (2014). Principles of microeconomics. Retrieved from http://www.saylor.org/site/textbooks/Principles%20of%20Microeconomics.pdf
University of Phoenix. (2014). Applying supply and demand concepts simulation. Retrieved from https://ecampus.phoenix.edu/secure/aapd/vendors/tata/UBAMsims/economics1/economics1_supply_demand_simulation.html
The housing market is very unique as unlike other goods and services, houses have permanence, it is a fixed location good causing the rules of supply and demand to be taken to new extremes. In the case of the Toronto housing market we can view in almost real time the role supply and demand play on he ever increasing house prices, additionally the fundamental economic issue of scarcity is made extremely apparent by the limited size of the city of Toronto.
In economics, particularly microeconomics, demand and supply are defined as, “an economic model of price determination in a market” (Ronald 2010). The price of petrol in Australia is rising, but the demand remains the same, due to the fact that fuel is a necessity. As price rises to higher levels, demand would continue to increase, even if the supply may fall. Singapore is identified as a primary supplier ...
The following paper analyzes the initial release of Microsoft's XBOX 360 gaming system release into the United States and the changes that occurred with the supply, demand and pricing of the product in the months following its release. The social science of economics tells us that supply, demand and price are closely related to one another and have a significant on how much of a particular good is purchased and the rate at which it is purchased by consumers. The XBOX 360 phenomenon is a solid example of the impact that changes in supply, demand and price have on the marketplace and the rate at which goods are purchased.
Housing can reach incredibly large proportions and have various on-site features such as large pools or perhaps the house has more than two floors. Obviously, only the wealthy class can afford a property with features such as this. Some may view it as unnecessary and excessive to own such a property. Thoreau described his home in “Walden” not having plastering or a chimney. He only used the home to protect himself from the rain and winters. Also there are different types of communities to move into. Housing a century ago was different in that there were only two types of areas to live in. Someone lived in the large and busy cities or in small, quaint homes in the countryside. Also housing was much smaller and it was less expensive for someone to make their own
Efforts to confront this issue were initiated by affects of World War II. Before the war, the Great Depression devastated the United States of America causing production of homes to stop. World War II soon followed and the country switched into productions for war, which also caused a halt i...
The housing boom created an illusion of ever increasing home equity. It was difficult to walk away from potential homes that seemed good on the surface, but in reality were either money pits or less than desirable. For the uninitiated, making sense out of the chaos when things start to go wrong is an emotional process that lends itself to the gradual disposal of the rose-colored glasses. The upkeep and maintenance that homeownership requires of the inexperienced homeowner, particularly an older home, is comparable to taking on a new entry-level job with diminishing returns. There is a prevailing chaos amid the turmoil of a broken water pipe during a holiday weekend.
In Book V of his Principles Alfred Marshall describes what he denominated “the state of arts” of the supply and demand theory, going back to Adam Smith. The assumptions then applied to the matter was that 1) demand comes first, 2) it is up to sellers to adjust supply to demand through production and marketing, a mix where the price is the most important variable, and 3) production takes time. Marshall summarized statement 2 later on into a single phrase: “Production and marketing are parts of the single process of adjustment of supply to demand” (MARSHALL, 1919, p. 181). This set of three assumptions suggests that the basic principles of the supply and demand theory collected by Marshall from the work by some scientists were then laid, requiring therefore only the right mathematical treatment.
The economic theory of supply and demand dictates that an excess of supply (hotels) to demand (customers) leads to a lower price consumers are willing to pay. This creates inelasticity within hotel pricing and places substantial pressure on management to meet the pricing needs of customers while providing an attractive and unique service. Hotel services are also intangible in nature, placing increased burden on hotel owners to utilise all available rooms through discounts and deals.
The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the amount of goods that buyers are willing and able to purchase at various prices, assuming all other non-price factors remain the same. The demand curve is almost always represented as downwards-sloping, meaning that as price decreases, consumers will buy more of the good. Just as the supply curves reflect marginal cost curves, demand curves can be described as marginal utility curves. The main determinants of individual demand are the price of the good, level of income, personal tastes, the population, government policies, the price of substitute goods, and the price of complementary goods.
A change in quantity supplied is just a movement from one point to another in the supply curve. In opposite, the cause of a change in supply is a change in one the determinants of supply that shifts the curve either to the left or the right. These determinants are the resource prices, technology, taxes and subsidies, producer expectations, and number of sellers. An equilibrium price is required to produce an equilibrium quantity and a price below that amount is referred as quantity supplied of zero no firms that are entering that particular business. If the coefficient of price is greater than zero, as the price of the output goes up, firms wants to produce more of that output. As the price of the output goes up it becomes more appealing for the firms to shift resources into the production of that output. Therefore, the slope of a supply curve is the change in price divided by the change in quantity. The constant in this equation is something less (negative number always) than zero because it requires strictly a positive...
The Perceived Demand Curve for a Perfect Competitor and Monopolist (Principle of Microeconomics, 2016). A perfectly competitive firm (a) has multiple firms competing against it, making the same product. Therefore the market sets the equilibrium price and the firm must accept it. The firm can produce as many products as it can afford to at the equilibrium price. However, a monopolist firm (b) can either cut or raise production to influence the price of their products or service. Therefore, giving it the ability to make substantial products at the cost of the consumers. However, not all monopolies are bad and some are even supported by the
For an increasing amount of people, the idea of renting is more attractive than buying in this real estate market, with the advantages outweighing the disadvantages to some. One large change that is occurring with the consumers in the market is the changing of their priorities. For example, purchasing a house used to be viewed as a large milestone, and contrary to this, there was a stigma attached to long-term renting. Renting long-term painted the picture that one does not have a strong income, they are irresponsible and young (Article 9). With the the generation of people now in the position to buy or rent, more are choosing the latter.
Housing has to appeal for different ages, likes and interests. This means different sizes, different shapes and different housing options, (flats, apartments, caravans, sleep outs etc). This large variety of housing options in a neighbourhood should allow for people to choose the best suited home within the same community as they move through their life stages. Two-thirds of Auckland’s housing market are 3 bedroom houses, although half the house in Auckland are owned by people with only two people at most. Changing trends also play part, which tends to show that people want to follow the new thing which seems to
The real estate market is characterized by extreme heterogeneity due to the location and physical attributes of a property. The rise in housing prices can be attributed to the Baby Boom generation entering the residential market. Volatility in the housing market are driven by factors other than demographic variables. Residential and commercial properties differ in dynamics and return properties. The decision of a household to buy a house in not only driven by the investment perspective but also by the need for a housing unit. But that is not the case with investors. There are various demographic factors taken into consideration like:
That is, it is sensitive to price change, and also to the quantity demanded. This means that if many people are consuming a good, the demand is greater than if less people are consuming the good. To further clarify, take the example of attending college. In an environment where most of an individual's peers are going to attend college, the individual will see college as the right thing to do, and also attend college to be like his peers. However, in an environment where most of an individual's peers are not going to attend college, the individual will have a decreased demand for college, and is unlikely to attend.