Essay On Competitive Markets

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1. Introduction
This assignment is based on to understand the concept of efficiency in a free market economic to analyze whether competitive markets use resources efficiently. This involves understanding what competitive markets are and how these markets allocate resources efficiently. According to (Whiting, n.d.) Competitive markets is one where there are numerous producers that compete with one another in hopes to provide goods and services we (as consumer) want and need. So they try to maximize their profit and output by competing the other firm. This leads to decrease in the price of goods and services due to high competition, thus increase consumer satisfaction. Moreover, competitive market is efficient only when the resources are allocated …show more content…

Their main aim is to make profit. For example; if a company is thinking about producing bubblegum, and they learn they can make money doing so, they will use that money incentive to enter the competitive market. (Whiting, n.d.) furthermore, there are many buyers and sellers in the competitive market. In a competitive market there will be less bargaining power for both buyers and sellers. For example; if one seller of wheat attempts to increase its profits by raising the price of its wheat, the buyer in the market will simply buy wheat from one of the numerous competitors. (Richards, n.d.). furthermore, these competitive markets produce Homogeneous products. Sellers have very weak power because all the competitors produce similar products. According to (Richards, n.d.) commodities such as wheat, corn, oil often used as examples of homogeneous products. Furthermore, companies in a competitive market tend to operate at the point at which marginal cost equals marginal revenue. (Richards, n.d.). finally, competitive markets are efficient for both buyers and sellers due to producing similar products firms try to maintain the price at same level. In additional buyers can buy from different competitors if the other competitor rises the price. Finally, sellers provide good quality products due to high competition and this leads to high growth of the market, thus increasing the

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