In markets, sellers compete {competition, market}| to sell similar goods or services.
price
Competition forces sellers to lower prices and profits to the lowest level that still allows them to keep selling goods or services. If one seller has lower price, everyone buys from that seller, until supply finishes. Other sellers must lower prices to sell anything.
If price is so low that seller cannot make profit, seller leaves market. This lowers supply and so raises price, allowing other sellers to profit more.
If price is too low, sellers lower production, and make something else, because profit is low for that good or service. Supply becomes less, and price rises.
If price is too high, all sellers have good profit. Existing sellers increase supply. Price lowers. New sellers can enter market to try to earn profit, thus raising supply and reducing price.
expenses
At lowest price, sellers that have higher expenses make less profit. They cannot raise price, because then they can sell nothing. They can only lower expenses.
expenses: cost
For sellers, trying to increase supply raises costs and trying to sell more requires lower prices. Ideally, price equals cost, and businesses make and sell optimum quantity.
effects: good
Competition can increase pressure to lower prices and lower costs. Competition can increase pressure to improve goods and services.
effects: bad
Competition can increase pressure to cheat, use unethical selling practices, and use unethical buying behavior. Competition can cause too many failed enterprises, caught in business cycles. Competition can cause non-productive expenditures, such as for advertising, image-making, or financial maneuvers. Competition can cause distribution, production, and demand inefficiencies. Competition can emphasize greed and winning at all costs. Economies based on winning can encourage monopoly, substandard products, and production values based on inessential factors, such as sex and power. Competition can make differential pricing.
Social Sciences>Economics>Microeconomics>Market
6-Economics-Microeconomics-Market
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Date Modified: 2022.0224