Market mechanism in economics
The main focus of economics is how societies can satisfy their wants as fully as possible, given their limited resources for providing the items that satisfy such wants. Amongst many explanations offered, market mechanism is more generally defined as the process by which a market provides a solution for allocating resources and making decisions about the quantity of goods and service that should be produced without involving the government.
Economics is more commonly defined as, the science which studies human behavior as a relationship between ends and scarce means, which have alternative uses. Thus economics is about people and the choices they make.
Market mechanism has been generally defined as:
“The market mechanism is the process by which buyers and sellers, acting in their own interests, establish a market price and determine the quantity of a good exchanged in a market. Buyers (consumers) attempt to improve their well-being by obtaining goods and services for consumption at the lowest possible prices. Sellers (producers) seek to earn profits by selling goods and services at the highest possible prices. However, in a competitive market neither buyers nor sellers can control the market price. Furthermore, both buyers and sellers must have good information about relevant alternatives, and they must be able to purchase or sell in a variety of geographically separated markets if the market outcome is to be efficient. A market that satisfies certain characteristics–many buyers and sellers, good information, and trader mobility–and in which relatively homogeneous (identical or nearly identical) goods are traded is said to be competitive. In such a market, price is determined by the interaction of buyers and sellers, and the competitive process of price determination establishes market equilibrium.”
The study of market mechanisms becomes vital, as we know that there is scarcity of resources and the study of economics in...
Bibliography: 1. Gwartney, James D., Stroup, Richard L., and Sobel, Russell S., Economics Private and Public Choice, (2000), Ninth Edition, The Dryden Press
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