definiotin of market mechanism

Market mechanism is a term from economics referring to the use of money exchanged by buyers and sellers with an open and understood system of value and time trade offs to produce the best distribution of goods and services. The use of the market mechanism does not imply a free market: there can be captive or controlled markets which seek to use supply and demand, or some other form of charging for scarcity, both in social situations and in engineering.

The market mechanism assumes perfect competition and is regulated by demand and supply. Equilibrium is when the two axis cross