All About Competition In The Economy

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Competition in the economy is the struggle of economic entities for efficiency in the use of factors of production under the same rules established for all participants. 

In economics, he often speaks of business competition between economic entities. Each of them wants to defeat his competitor and by certain actions tries to slow down his development.

Competition in the economy, as a rule, is viewed through the prism of 4 aspects:

  • The same rules for each market participant.
  • The degree of competition in the market.
  • It is a self-regulating element operating on market conditions.
  • This is a criterion that determines the type of industry market.

Competition between companies is always in the hands of buyers. Because of it, they get more favorable conditions for the purchase of goods and services.

Perfect competition in the economy

Perfect competition is a state of the market in which many consumers and sellers produce their goods. At the same time, it is important that each seller has a small market share and cannot dictate to others the conditions that must be followed when selling a product or service. At the same time, it is not excluded that the subject of the economy will have information about prices, their dynamics, and competitors both in one subject of the federation and throughout the country.

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It is important to understand that there is almost no industry that was perfect, at least according to the established framework. They can be as close as possible to it, but not correspond to it at 100%.

Signs that will help identify the ideal market:

  • The rules for each participant are equal.
  • No entry and exit barriers are associated with production.
  • There is no limit on how many participants can be in the market.
  • Free pricing.
  • The complete absence of pressure from one market participant to another.

To create such a model of competition is very difficult, and sometimes impossible. Agriculture is considered the closest industry to it.

Imperfect competition in the economy

Imperfect competition, as a rule, is most applicable to the modern structure of the world. It assumes a market where there is high competition and there are leaders. That is, imperfect competition is called that competition, where several manufacturers can control the prices of their goods, the production in which they are engaged.

Signs of such competition are:

  • Unequal conditions for each market participant and their products in particular.
  • Not everyone can enter such a market.
  • Government intervention in the market.
  • The use of false information in advertising campaigns regarding the properties of a product or production in general.

Of course, imperfect competition is bad for the consumer in the first place. With such a market structure, they expect:

  • The constant rise in prices is supported by absolutely nothing.
  • Lack of progress in scientific and technological terms.
  • Inability to compete in the global market.
  • Corruption and all the factors that follow from it.

Imperfect competition has several forms, the most relevant of which are: monopoly, monopolistic competition, and oligopoly.

Monopoly

A monopoly implies an exclusive right to something. It is perfectly applied to the economy, when, for example, the manufacturer receives the exclusive right to buy and sell goods to the state or another group of people. The purpose of organizing such a market device is clear – to extract large profits. They get it because they can control the prices of goods, as well as reduce costs.

Monopolistic competition

Monopolistic competition appears in the market when many sellers want to sell their differentiated products. It is roughly similar to a monopoly because several firms and companies can control the price of a product. At the same time, it is similar to perfect competition because the product can be sold immediately by some manufacturers, and any participant can enter the market.

Oligopoly

An oligopoly is a market where several firms or companies dominate the industry. To simplify, there are several leading companies in this industry, but they are not enough to call such a market device perfect competition. Often, in such a market there will be no more than three firms providing services in one direction or another.

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