The document discusses the market mechanism. It defines the market mechanism as the place where buyers and sellers interact to exchange goods and services at mutually agreed upon prices. The key aspects of the market mechanism are supply and demand, which determine the equilibrium price. The market mechanism coordinates economic activity through price signals in response to supply and demand. It has advantages like efficient allocation of resources but also disadvantages if not properly regulated, like prioritizing profits over social welfare.

1. DAV COLLEGE
SECTOR TEN
Prepared byJamshid Ahmad Ludin
Roll number 34060
Subject: Economic - Administration
Submitted to Sumita Singh (respected)
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2. Market mechanism
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3. CONTENT
Introduction
Meaning of market mechanism
Difference between market mechanism and price mechanism
Mine feature
Definition of Supply, demand and price
Definition of Equilibrium with Example
Advantage market mechanism
Disadvantage market mechanism
Conclusion
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4. Introduction
Every commodity and service has its own price determined by two forces demand and supply in a
free enterprise economy there are as many prices as there are goods service and factors of
production all price are collectively called price mechanism the price mechanism is also known as
market mechanism where each individual is interested in knowing whether goods he wants to buy
have become cheaper dearer, similarly a producer is interested in knowing whether the price of
products which he produces have gone up or down.
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5. what is a Market?
Market is the place of that where goods and services are brought and sold
Or
A place / region where sellers and buyers are interacted with goods and service by selling and
purchasing at a given price it is considered as a process
Goods and service
Buyers and sellers
A place or region
Given price
What is a mechanism ?
mechanism is a mathematical structure that models institutions through which economic activity is
activity is guided and coordinated.They seek to do so in ways that economize on the resources
needed to operate the institutions, and that provide incentives that induce the required behaviors
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6. What is market mechanism?
Market mechanism is that place or region which the
buyers and sellers of commodity are able to contact
each other for having economic as exchange as per
the requirements
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7. Market mechanism is often interpreted as a ‘free’
market system. For a layman ‘free’ means that when
you go to a market, there is no restriction – you can
buy as much as you want OR sell any amount OR
choose to do nothing
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8. What are the differences between market mechanism and price mechanism?
In economics, a price mechanism is the manner in which the prices of goods or
services affect. The supply and demand for goods and services, principally by
the price elasticity of demand.
A price mechanism, part of a market mechanism, comprises various ways to
match up buyers and sellers.
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9. DEMAND SUPPLY AND PRICE
Demand
• The demand for product means the number of units of the product that people are
willing to buy at a given market price
Supply
• The supply of a product means the number of units of the product that producers
are willing to make available for sale at a given marker price
Price
• The price of any product in the long run is determined by the interaction of the
supply of and the demand for the product
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10. EQUILIBRIUM
•What does a market equilibrium mean?
•Equilibrium is the state in which market supply and
and demand balance each other, and as a result prices
become stable. Generally, an over-supply of goods or
services causes prices to go down, which results in
higher demand—while an under-supply or shortage
causes prices to go up resulting in less demand.
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11. CHART OF DEMAND AND SUPPLY
Price Quantity demand Quantity supply Market position Effect on price
500 50 30 Exist demand
1000 45 45 Equilibrium
300 30 50 Exist supply
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13. FEATURES
Need not have to be a particular place or area
Buyers and sellers need not come into personal contact with each other
Ownership of resources of production is either private or individual.
Economic decisions are taken while keeping price mechanism in mind.
Word market may refer to a commodity or service or to geographical area.
To provide an effective mechanism that results in emission reductions at a least cost
option.
The buyers and sellers are able to strike or dial about the prices and quantities to be
brought and sold.
Economists distinguish market on the basis of
 Nature of goods and services
 No of firms and degree of competition
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14. THE STRUCTURE OF MARKET MECHANISM
• What kind of goods are sole
• Who determines the market prices
• Organization
Factors that determine the market forms
• Number of buyers and sellers
• Nature of the product
• Knowledge about market
• Freedom of intern or exit
• Degree of price and influence
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15. THE FORM OF MARKETS
Prefect
competition
Monopoly monopolistic Oligopoly Monopsony
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16. ADVANTAGE
Give us to freedom to take decisions regarding buying and
selling
Bring together potential users and sellers in an environment
that both can gain from the interaction
Allows and Drives innovation and cost reductions
Creates competition
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17. DISADVANTAGE
Sustainable development not always clearly addressed in the line with expectations
Market mechanism fails to provide a proper guideline for using appropriate material
for selecting project. It diverts investment to those directions in which profits are
high, neglecting socially desirable low profit ventures
Market can only serve those who are part of the market system
Market as a mechanism does not ensure that individual decision will optimize
economic performance in terms of society’s preferences and economic goals
Market mechanism is unlikely to produce the rapid structural changes which
development requires.
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18. CONCLUSION
• Supply and demand interact to determine the market clearing price
• When not in equilibrium the market will adjust to alleviate a shortage or surplus and
return the market to equilibrium
• Markets must be competitive for the mechanism to be efficient
• Supply and demand analysis can:
• Help us understand predict how world economic conditions affect market price and
production
• Analyze the impact of government price controls, minimum wages, price supports,
and production incentives on the economy
• Determine how taxes, subsidies, tariffs and import quotas affect consumers and
producers
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19. The end
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20. Thanks for the
watching
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