COMPETITION IN ECONOMICS

Competition in economics is a term that includes the concept of individuals and firms determined for a greater share of a market to sell or buy goods and services.

Competition causes commercial firms to develop new products, services and technologies, which would give consumers greater selection and better products.

The greater selection typically causes lower prices for the products, compared to what the price would be if there was MONOPOLY or OLIGOPY
Monopoly: no competition
Oligopy: little competition  

Competition is seen as a state which produces gains for the whole economy, through promoting consumer sovereignty
Consumer Sovereignty: the desires and needs of consumers control the output of producers

In a small number of goods and services, the cost structure means that competition may be inefficient. These situations are known as NATURAL MONOPOLY and are usually publically provided or tightly regulated. The most common example is water supplies.

4 LEVELS OF ECONOMIC COMPETITION HAVE BEEN CLASSIFIED:

The most narrow form is direct competition (a.k.a category competition or brand competition), where products that perform the same function compete against each other. Sometimes two companies are rivals and one adds new products to theirline so that each company distributes the same thing and they compete.

The next form is substitute competition, where

products that are close substitutes for one

another compete. For example, coffee and tea

companies, or pepsi and coke.

   

           The broadest form of competition is typically called budget competition. Included in this category is anything that the consumer might want to spend their available money on.