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How Is the Equilibrium Price Determined? What Occurs If the Price

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Essay

How is the equilibrium price determined? What occurs if the price is above the equilibrium price? What occurs if the price is below the equilibrium price?


Definitions:

Consumption

The use of goods and services by households or individuals, often considered in terms of the amount consumed.

Interest Rate

The interest rate is the cost of borrowing money expressed as a percentage of the total amount loaned, typically noted on an annual basis.

Income

The revenue collected, generally on a routine basis, from work performed or earnings from investments.

Present Value

A financial concept that calculates the current worth of a future sum of money or stream of cash flows, given a specified rate of return.

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