What is market mechanism in economics?

In economics, the market mechanism is a mechanism by which the use of money exchanged by buyers and sellers with an open and understood system of value and time trade-offs in a market tends to optimize distribution of goods and services in at least some ways.

What is a market system?

Markets and prices are key components of the market system. They give the system its ability to coordinate millions of daily economic decisions. A market is an institution or mechanism that brings buyers (“demanders”) and sellers (“suppliers”) into contact. A market system conveys the decisions made by buyers and sellers of products and factors.

How does the economic system determine what goods are produced?

The economic system determines what goods are produced, how they are produced, who gets them, how to accommodate change, and how to promote technological progress. Economic systems differ as to (1) who owns the factors of production and (2) the method used to motivate, coordinate, and direct economic activity.