The interconnection and interaction of the most important market elements, which are supply, demand and price form a market mechanism. The market mechanism and its elements are designed to meet the needs of society. Limited resources are needed to meet these needs. In this regard, it is necessary to choose the best option for their use.
The market mechanism and its elements are designed to meet the needs expressed through demand. Some social needs cannot be expressed through demand; these are so-called public goods. These include ensuring public safety, a unified energy system, national defense, etc.
The market mechanism and its elements are closely related to price, which is the main tool that affects supply and demand. Most of the needs of the population are met through demand, which depends on many factors. This may be advertising, fashion, changing the tastes of customers. It must be borne in mind that the buyer purchasing goods wants to save, as the wages of the population are not high. This means that the quantity of goods purchased depends on the price. High prices tend to reduce demand, while low prices increase them. Fluctuations in wholesale prices do not have a significant effect on population demand. Demand is affected mainly by retail prices.
Demand and supply not only depend on the price, they influence each other and directly, regardless of the price. Supply on the market generates demand, and growth in demand, in turn, is the supply of goods.
Demand - the need of the population for any product or service and the desire to purchase it at a certain price.
Supply - provision for the purchase of certain goods that are in demand.
Price is the actual ratio of supply and demand.
The economic situation of consumers and producers depends on market conditions. They must be guided in their activities
market parameters, that is, demand, supply and price.
Under market conditions understand the totality of the economic conditions that are developing at present, affecting the economic activity of the sale of goods and the implementation of services. Economic conditions include: price level, supply and demand ratio, consumer solvency, market capacity, inventory status, etc. The market mechanism and its elements must be known in order to carry out their economic activities. It is necessary to understand the laws that underlie its use. These are laws: supply and demand, falling demand, value and utility, competition, changes in supply, profit, etc. Laws are implemented through different types of prices: equilibrium, equivalent exchange, discriminatory, monopolistic, zonal, etc.
Market management mechanism in Russia.
In the event that the market remains uncontrolled, is not regulated by the state, then the population is stratified by financial situation, there are no social guarantees, monopolization of the market may occur, as well as a number of other negative aspects, since the market economy is aimed primarily for profit.
The state assumes the functions of counteracting negative phenomena that may occur, and uses all possible effective mechanisms and means for this. The correlation of the market mechanism and government should be achieved, in which the state needs to ensure the guardianship of the market mechanism.
Market mechanism for generating income
Incomes of the population are indicators of the social and economic well-being of society. As a result of their functional distribution, the formation of wages, profits, rents and interest. Functional distribution is the ratio of income from labor and property.