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Price determination with market force

Updated: 12/12/2022
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15y ago

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Market forces generally is taken to mean the determinants of supply and demand. Generally where supply and demand meet is the equilibrium price ie optimum price for a given product. If either the supply or demand changes then the price will be affected. For example, currently we have a demand for housing which cannot be met with the existing supply (as well as the fact of having low interest rates) so with each sale of property the price goes up. This continued for some time until we had the credit crunch and the supply of money (mortgages) became severely restricted thereby reducing the demand for property and ultimately prices are coming down (except for London).

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