Market And Market Mechanism

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Market And Market Mechanism
Market And Market Mechanism

Video: Market And Market Mechanism

Video: Market And Market Mechanism
Video: A Level Economics - The Market Mechanism 2024, March
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The market is one of the fundamental economic categories and the main concept of economic practice. With the development of commodity production, the market was constantly changing, its new forms appeared, the market mechanism improved. Although the concept of the market seems to many to be quite unambiguous, in Russia and in the West they put fundamentally different meanings into it.

Market and market mechanism
Market and market mechanism

Initially, the concept of "market" had a direct practical meaning. This word denoted any space, for example, a city square or a bazaar, where all kinds of goods were bought and sold. Over time, the social division of labor deepened, and commodity production became more and more developed, so the term "market" acquired a broader economic interpretation.

It is no longer understood as a strictly limited territory for the sale of goods. The French economist for the first time designated the term market as a certain area where homogeneous economic factors operate, so the prices of goods are fairly quickly equalized only under the influence of supply and demand.

Modern interpretation

Today the market is usually considered as a type of economic ties between economic entities. Economic ties can be natural-material, or gratuitous, and commodity, carried out through the market. If we take into account reproductive exchange, then the market can be considered as a form of competitive connection between consumption and production. In particular, P. Samuelson defines the market as a “competitive bidding process”.

The Russian economist L. Abalkin believes that an exchange organized according to the laws of commodity production, as well as a set of commodity and monetary relations, should be called a market. Based on this definition, in order to understand the essence of the market, it is necessary to clarify a number of significant issues, namely:

- how exactly the laws of commodity production and circulation operate;

- how to understand the totality of commodity and monetary relations.

The market mechanism and its main elements

The aggregate of the basic elements of the market - prices, supply and demand - form the market mechanism. The basis of this mechanism is price, which directly affects supply and demand. In particular, supply and demand are inversely related to price. The price increases - the demand decreases. The supply decreases - the price increases. In this case, the most important role is played not by the absolute values of supply and demand for any goods, but by their ratio. It is it that determines the fate of specific sellers and buyers.

Supply, demand and equilibrium price are the core of the market. It is generally accepted that in a market economy both consumers of products and their producers are guided by the laws of the market. The market mechanism acts as a coercive mechanism forcing the entrepreneur, who cares about his own profit, to focus on the needs of the consumer.

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