To speak of a functioning and perfect economy requires inter alia a sufficient number of competitors. In other words: There has to be a competition. The proverb “Competition stimulates business” is particularly appropriate in this context. But why is a larger selection of producers beneficial for each supplier?
Types of competition
Basically you can differentiate three different types of competition. In addition to the well-known price competition, there is also a product and condition competition. In the price competition, for example, the providers try to attract customers through active pricing. If the price is lowered, the number of consumers increases. In return, the logical conclusion is that demand is falling at higher prices.
Function of competition
Functioning competition ensures within an economy for a possible cost-effective and appropriate care of all citizens. It is not without reason that the competition is often viewed as a motor of an economy. Finally, the competition can not only ensure that more potential buyers are interested in the respective commodity but also lead to price changes in the market in favor of demand. A market economy always has usually about competition in the various sectors .
Requirements for a competition
In order to create competition in an economy at all, some conditions must be fulfilled. For example, companies that wish to participate in the competition must have sufficient financial and human resources. In addition, market transparency and decision-making play a key role. The aim of each competition is likely a dominant position or even a normally monopoly be.
Consequences of competition
If there is a competition in a market, this has many advantages for buyers. So an active competition, for example, ensures that is working on the development of products and services to stand out from the competition can. Of course there is a winner and loser in a dominant competition. So providers, who break at the constant competitive pressure and price pressure and which, which can be carried out and are accordingly successful.