Question

Briefly answer while employing at least one economic term.

What conditions are necessary for economic competition to exist?

Answer 1

The necessary condition is the existence of free economy.

Explanation: the government should not intervene in the act of the market. The market should reach the equilibrium at its own. It indicates the free market and free economy. An individual always wants to be financially rich. In the course of such wanting, public interest might not take place. But promoting own actually promotes the public interest unintentionally. Accumulation of each individual’s self-interest actually fulfills nation’s interest. This is called as invisible hand, which creates economic competition and growth of the nation.

Relaxation of government restriction on business implies the free-economy. Government should not interfere but should monitor business conducts because of preventing any unethical issue.

Explanation: A graph is taken for understanding Price Supply V P2 Demand Quantity The vertical axis represents the price and the horizontal axis represents quantity. Suppose the market price is P1, where supply is higher than demand by DV; this is the surplus suppliers will leave the market, because their products are not sold; it makes the supply down from V to E. At the same time the demand increases, since non-availability of products; it makes the demand up from D to E. The point E, the equilibrium level, is established now where demand and supply intersects without any regulator control; the equilibrium price is P The same thing happens if the price is P2. This is the area where demand is greater than supply causing shortage. More and more suppliers will come in the market to meet the excess demand Once the goods E is satisfied at price P, without any regulator control. area. Few available in the market, the excess demand will be no more. The equilibrium are S o.