Market and Market Mechanism

The market and the market mechanism are a self-regulating system of resources for production, exchange and distribution of benefits, which is based on a competitive environment and the interaction of supply and demand, regulated by a free price signal.

In a market-based, free decentralized economy, the supply, thanks to competition and price flexibility, adjusts to changing demand, which makes it impossible for the existence of a chronic deficit, poor quality of goods and their too narrow range.

Economists of classical and neoclassical schools, exploring the market and market mechanism, Emphasized that the market is able to automatically restore equilibrium in cases of its temporary loss. Adjusting the proportions of production processes is a function of the law of value.

Market and market mechanism Open their opportunities only in a competitive environment. The greater the deviation of the real market from the ideal model, the less the work of the market mechanism is . Pricing processes are influenced by monopolies, which reduces the efficiency with which resources should be used, while revenues are mainly distributed among monopolists. In this situation, there is a need for government intervention in the economy to reduce the impact of the negative impact on the competitive environment of the impact of monopolies.

The market and market mechanism generate prices and allocate resources. The mechanism of market self-regulation includes such key concepts as competition, price, supply and demand.

Demand is the term generalizing. He describes all potential and actual buyers. Demand for the manifestation of the needs of people who are provided with a monetary equivalent is evidence of this. It does not express the whole set of needs, but only that part which is secured by money. At the same time, the market and the market mechanism satisfy only those needs that are expressed through demand. They do not include services and the benefits of collective use, that is, public goods.

The proposal , like demand, is a general term. It describes the behavior of potential and actual sellers (producers) of goods. The offer is sometimes defined as the aggregate of goods within certain price boundaries that are present in the market and can be sold by producers.

The price in monetary terms shows the value of the goods. The price depends on the value of the goods and the ratio of supply and demand in the market. Prices are established under the impact of economic laws, primarily the law of value, according to which the socially necessary labor costs are based on the price. Also, the price is affected by the laws of supply and demand. The mechanism of a market economy is manifested in cases of discrepancy between the categories of supply and demand in the sphere of exchange.

Competition is a form of interaction between market actors and the market mechanism, it also regulates the proportions of supply and demand.

Each element of the market mechanism is related to others in the most direct and close manner. Price is the main tool of the market mechanism, coordinating and adapting to each other the supply of demand. Focusing on the price, entrepreneurs and consumers choose which product to produce or purchase. It is prices that characterize the state of the market.

Elements of the market mechanism constantly interact. The demand is related to the supply, they depend on the price level. In turn, competition affects all of the above categories, integrating them into the system. With this influence of the components of the mechanism on each other, they balance market relations.