Market pricing mechanism

According to the law of demand, the impulse to the behavior of the consumer (buyer) sets the price of the offer, according to which the producer offers him his goods. Of course, the price of the offer is only the initial, the initial price of the commodity, which then collides with the price of demand, i.e. the price that the consumer is able and willing to pay. Usually a compromise is achieved in the form of a "market price" of the commodity, for which it is actually sold and bought. The market price is also called the "equilibrium price", because it is at the level when the seller still agrees to sell (at a lower price, the sale is unprofitable), and the buyer already agrees to buy (at a higher price, the purchase is unprofitable).

The level of intersection of demand and supply curves determines the level of the market price (the so-called "equilibrium price"). This is really an equilibrium, balancing price, for any other "point" means a disproportion between the effective demand and the corresponding commodity offer.

The return of the price to the equilibrium level can be prevented only by two circumstances:

• a)    the monopoly of the seller (or buyer), artificially holding the price in its favor,

• b)    the administrative regulation of prices (hence, in particular, the state is responsible for setting prices, which leads, as a rule, to a deficit or overproduction).

Each commodity producer is guided by one economic interest: to sell products to cover the costs of production and circulation, and to make a profit. In the market there is a market price, on which the goods are sold. This price is dictated mainly by the costs of socially necessary time and is practically set by those producers that produce the bulk of the products on the market.

The market mechanism of pricing is influenced by the number of buyers and sellers in the market of goods, their competition. Thus, competition between buyers causes a rise in prices, and competition between sellers - their decline. The law of competition has a stronger impact on the behavior of market participants compared with the laws of supply and demand. Free competition, as it were, causes excessively high and very low prices to move to the point of equilibrium. This centripetal movement leads, in the final analysis, to the equality of the opposing sides.

Market equilibrium in conditions of imperfect competition.

Another situation in the interaction of supply and demand, the principles of competitive behavior arises in the conditions of domination of monopolies and oligopoly, or in conditions of imperfect competition. The price on such a market also depends on the output volumes, moreover, this dependence is inversely proportional.

A monopolist sets a higher price for his goods and produces them less than a company operating under conditions of perfect competition. Under monopoly domination, the price of the offer expresses the relationship between the movement of the market price, the price of production and its monopoly price, which are based on certain aspects of the laws: cost, supply and demand, monopolization of production and exchange. When supply prices predominate, there are additional incentives for expanding production, and competitors try to penetrate into monopolized spheres of the market. This leads to a deterioration in supply conditions, lower prices and the subsequent reduction in the production of certain types of goods.

If market prices are set at the level of demand prices, large companies try to reduce the volume of capacity utilization, influence the formation of demand, regulate the supply-demand ratio (through marketing activities, use of contract form, etc.), try not to allow a significant excess of prices over demand.

Given the negative influence of monopolies on the mechanism of market equilibrium, even representatives of the neoclassical trend in political economy consider it expedient to intervene in the monopolized sectors of the economy. In such industries, the state, in their opinion, should control the pricing process, and sometimes even carry out their nationalization and establish tariffs in accordance with the marginal costs.

Monopolistic associations themselves and at their discretion set a market price for the products they sell. In the conditions of free competition, in determining the equilibrium price, the interaction of supply and demand (demand curve and supply curve) is taken into account. However, monopolistic associations do not take into account the objectively necessary volume of production of goods. These organizations influence the volume of demand in their own interests, setting a favorable price.

Used sources:

• 1.    Умарова Г. Ш. Роль иностранных инвестиций в развитии

  национальной экономики //International scientific journal. – 2016. – №. 3. – С. 148-149.

• 2.    Камолов А.А. Внешнеэкономическая деятельность

  Узбекистана"Теория и практика современной науки 5 (2017): 958-961.

"Экономика и социум" №2 (45) 2018