How does competition among businesses aid the consumer?

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Ashley Kannan | Middle School Teacher | (Level 3) Distinguished Educator

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The theoretical perspective is probably the best one to answer this question.  Free market advocates such as Adam Smith believe that competition in the market place helps the consumers in a couple of ways.  The first is that it offers choice.  The consumer is aided by not having to "settle" for something that is not in their self- interest.  Competition for the consumer helps articulate need and satisfy desire and want.  The more choices or competition that is evident, the greater the chance that self- interest is fulfilled.  This becomes one of the fundamental principles that underscores a market economy.  At the same time, competition aids the consumer because the more competitive forces that are at play in the marketplace, the greater the chance that prices will go down for the consumers.  The consumer struggles under the weight of a system where there is little in way of competitive pricing.  Yet, when there are more competitive forces, prices can be to the benefit of the consumer.  Finally, the consumer benefits when there is competition amongst businesses because, the belief goes, the best and most efficient product is going to be fielded.  For example, if one company develops a great cell phone, appreciated by consumers, it is competition that drives the producers to develop the next "best" cell phone.  Consumers benefit because competition is constantly driving the production of goods and services that make the consumer's life better and their purchasing power more relevant.  In these examples, competition among businesses greatly aids the consumer.


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