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Explain Why the Price of a Good Tends to Rise

question 36

Essay

Explain why the price of a good tends to rise when there is a shortage of the good.Give a hypothetical numerical example to help support your answer.


Definitions:

Pro Rata Clause

A provision in a contract that allocates rights, obligations, or benefits proportionately among all parties involved.

Face Amount

The nominal or stated value of a financial instrument or insurance policy, due upon maturity or death.

Covered Peril

A risk or event, such as fire or theft, that is specifically insured against under a policy, meaning the insurer has agreed to bear the risk and compensate the insured.

Declaratory Judgment

A court's ruling regarding the legal rights and obligations of the parties in a civil lawsuit, without ordering any specific action or awarding damages.

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