Question

Does competition always lead to lower prices in the market ?

please explain in 4 paragraph

Answer 1

The price of the products in the market is not only influenced by the demand of the product. The level of competition in the market has a great influence on the prices in the market. All the sellers in the market seek to set the best price that will maximize their profit.

When there is competition in the market, the sellers in the market set their prices by taking into account the price set by other sellers. The action of one seller affects the action of other seller in the market.

In most of the cases, competition in the market leads to lower price. When a product is available with many sellers in the market the level of competition becomes very high which compels the firms to lower their prices.

On the other hand, when a product is available with few numbers of sellers, the competition can also increase the price. Consider the case when the product is available with only two sellers and that product is highly demanded. In this case the sellers will increase their prices as the consumers do not have many choices.