What are ten reasons why competition is the best market mechanism for lowering prices?

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Competition is one of the most important components of determining and lowering the pricing of consumer goods. Here are ten reasons why competition is the best market mechanism for lowering prices:

  1. Competition motivates businesses to ensure they are delivering a quality product at a low price. The greater the quality of a product, the higher the competitor can set the price.
  2. Businesses set prices based on the prices set by their competitors. Increased competition within a market usually results in decreased prices.
  3. Competition ensures that products with the most features typically are able to be priced higher than products with the least features.
  4. Competition affects the pricing, quality, and services that accompany every product, regardless of which industry.
  5. Competition results in the innovation of existing products across every market. Competition gives businesses an incentive to update and improve their products as new technology is introduced.
  6. Competition can also result in the invention of new products that improve the quality of life for consumers.
  7. Competition is good for businesses because it encourages businesses to improve the efficiency and effectiveness of their manufacturing systems and processes.
  8. Competition assists businesses in determining the needs and wants of consumers. Businesses can accurate assess the market through the purchasing patterns of consumers. Once a business has thoroughly assessed a market, its target audience can be identified.
  9. Competition ensures that consumers are able to obtain quality products and services.
  10. Competition improves the economy on a national level as well as presents entrepreneurship opportunities.
Last Updated by eNotes Editorial on
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