The market mechanism is a concept in economics that involves the exchange of currency between buyers and sellers in a transparent and structured system. Through this system, individuals can compare and trade off the value and time needed to obtain certain goods and services, resulting in an optimal distribution. It is important to note that the use of the market mechanism does not necessarily equate to a completely free market. Controlled or captive markets may still employ the principles of supply and demand or other methods of pricing according to scarcity, both in social and technical spheres.
To harness the benefits of the market mechanism, it assumes the conditions of perfect competition and is influenced by the forces of demand and supply. When the two intersect, a state of equilibrium is achieved.
