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Essay text:
Interaction of the forces of Demand and Supply:-
In a perfectly competitive market or what is sometimes referred to as a free market economy, prices are determined by the interaction of the forces of demand and supply. The determination of prices by the interaction of the invisible forces of demand and supply is known as the ‘price mechanism’ or ‘price system’.
From the laws of demand and supply, it is known that the lower the price the greater the quantity demanded, while at higher prices less will be demanded. On the other hand, the higher the price the greater the quantity supplied...
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