The Market Mechanism


2020-07-03 03:07:08




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Market mechanism is a set of mutually  methods and leverage economic nature of production, exchange, distribution and consumption in the laws of the market and commodity-money relations.

Famous American economists Samuelson and Nordhaus define Market mechanism of economic regulation as a form of organization of the economy where individual consumers and producers through market interact to solve common economic problems.

The Polish economist Balcerowicz sees the Market mechanism as a way to retain  the balance required between demand and supply in a horizontal direction. In his opinion, the market system can only be called an economic system where the market mechanism is the main way to distribute and coordinate goods.

The Market, functioning freely in reality, bears the elements free. There are natural and unnatural education of the monopolistic type, which tend to retain high prices and so interfere with the free movement of resources, which leads to restriction of access to the markets.

The Distortion of market processes could come under the influence of inflation, the wrong policy of the state in the economy, failures of entrepreneurs, lack of commercial awareness and other reasons.

The development of the distortion in this direction may continue until the start of the operation of the market mechanism. In this case, it acts as a limit. Under his influence, despite all the distortions and deformations, the prices will change due to the impact of supply and demand, and investment flows, the movement of resources will continue to focus on fluctuations in demand. Remain intact and other parts of the market mechanism that maintains the viability of the market.


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Market mechanism (market economy) operates thanks to this system the important constituent elements, which generally constitute the mechanism of the market. These important elements include, first of all, producers and consumers. The interaction between them is set as exchange of the results activities. Manufacturers are suppliers of a new product, consumers – his buyers. Consumption is a logical continuation of the process of production in which the product is processed by users.

The Following element – economic isolation due to private ownership or mixed. The third element – prices. This is the most important element, because prices reflect the essence of the mutual development of supply and demand in the market. The fourth element – the supply and demand. They, like prices, are the main elements of the market, providing a link between consumers of the goods and their manufacturers. The fifth element – competition. It maximizes profit and expands production.

Market mechanism Is a way of interaction of subjects of market relations and the mechanism of the free  regulate its proportions.  the Economist Adam Smith called competition «the invisible hand” market. The chief function of competition is to determine the magnitude of the economic regulators, such as price, rate of interest, rate of return and others.

Competition – it is the freedom of participation of economic units in any economic sector. This freedom is necessary for the adaptation of economy to changes in technology, the  resource supply or  tastes of consumers. The main advantage of the market lies in the fact that efficiency of production is constantly stimulated. The object of the competition is its price and production costs, design and quality of products. Competition is characterized by the development ability of scientific and technological progress, response to changes in demand, and equalization of the profit rate and the level of wages in sectors of the economy.

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