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How is price mechanism or supply and demand concerned?
The price mechanism or supply and demand:
The price mechanism or supply and demand is concerned with how buyers and sellers interact together in order to arrive at a market price. Where demand equals supply this would be at the ‘equilibrium price and quantity’, always found automatically within a perfectly competitive market when buyers and sellers interact. The price mechanism is used also to explain how a free market economy or the private sector allocates resources and determines a market price within an industry.
The equilibrium quantity and price Q1 and P1 is represented through the diagram as demonstrated above, here is no shortage or surplus into the market or demand equals supply and hence the market is into equilibrium (or balance) along with no downward or upward pressure for prices to increase or fall correspondingly.
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