How Competition Regulates the market.
- Free Market Economy has much competition
- Two terms for people involved in a free market are households and firms
- Each company specializes in a few services or products
- Since there are other companies that specialize generally in the same things this create competition
Types of Competition
- Pure Competition-Not really found in the world
- Monopolistic Competition-Most modern economies and markets are this
- Oligopoly-This is found in a few markets like oil markets or agriculture but is still rare.
- Monopoly-Somewhat rare nowadays but once was quite common, at least on a national scale if not international.
- Markets of all types is made up of thousands and millions of transactions done by individuals.
- Is the motivating force in a free market.
- Incentive is the hope or fear that encourages a people to act in a certain way.
- People respond kind of the same way for both positive or negative incentives.
- Incentives are the reasons that people buy what they buy.
The Invisible hand
- Self-interest and competition work together to regulate the market.
- Self-interests=consumers buy certain goods/services and firms make them.
- Competition=Produce more and lower prices
- No central planning or direction
- Market runs efficiently even though there is no central authority.
Soft Drinks; The Coca-Cola Company vs.PepsiCo
Coca-cola produces coke while PepsiCo produces the highly popular pepsi. This two are very similar drinks that compete for the same customers. The only thing different is the prices and not even that at times.
Tablets; Amazon vs. Barnes and Noble
Amazon is leading the way with its Amazon Fire and the other tablet versions that it others. Barnes and Noble is really the only other competition that amazon has for e-readers. Now both companies have competition with other tablet makers but with their much cheaper prices there isn't much competition. The Nook is an a good tablet but it is too expensive compared the the Fire.
Jean;Old Navy vs. Lee
Old Navy is high priced but so is Lee. They compete for the same consumers but they have different textiles. Old Navy is more about soft textiles while Lee is a little bit different and more firm textile.