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The organization of space within cities is mainly driven by spatial equilibrium forces. This chapter argues that a person who is indifferent about living in two locations within the city must derive the same net utility from these locations. This allows us to explain how rent costs decline away from the city centre as people need to be adequately compensated for higher transportation costs. We can extend the basic framework to incorporate the choice of different transport methods, changes in the slope of the rent gradient, the choice of the amount of land to use (and thus population density), building height, individual heterogeneity, the role of amenities, and observed segregation within the city.