Competitive Markets
Competitive markets are economic systems in which buyers and sellers interact to determine the prices of goods and services. In a competitive market, the forces of supply and demand determine the prices of goods and services, and the market is said to be in equilibrium when the quantity of goods and services supplied is equal to the quantity demanded. In a competitive market, buyers and sellers have equal access to information and resources, and no single buyer or seller has the power to influence the market.
History of Competitive Markets
The concept of competitive markets has been around since the 18th century, when Adam Smith wrote his famous book, The Wealth of Nations. In this book, Smith argued that competitive markets are the most efficient way to allocate resources and that the free market should be allowed to operate without interference from the government. Since then, economists have studied the effects of competition on prices, wages, and other economic variables.
In the 20th century, economists such as John Maynard Keynes and Milton Friedman developed theories about how competitive markets work and how government intervention can affect the functioning of the market. These theories have been used to inform economic policy in many countries around the world.
Comparisons
| Competitive Market | Non-Competitive Market |
|---|---|
| Prices determined by supply and demand | Prices determined by a single seller |
| Buyers and sellers have equal access to information and resources | Buyers and sellers have unequal access to information and resources |
| No single buyer or seller has the power to influence the market | A single buyer or seller has the power to influence the market |
Summary
Competitive markets are economic systems in which buyers and sellers interact to determine the prices of goods and services. In a competitive market, the forces of supply and demand determine the prices of goods and services, and the market is said to be in equilibrium when the quantity of goods and services supplied is equal to the quantity demanded. For more information about competitive markets, you can visit websites such as Investopedia, The Balance, and The Economist.
See Also
- Monopoly
- Oligopoly
- Perfect Competition
- Monopolistic Competition
- Supply and Demand
- Price Elasticity
- Marginal Cost
- Marginal Revenue
- Game Theory
- Externalities
