Question

Capitalism, with a substantial amount of competition, is often considered to be preferable to centrally-planned economies without competition. What's so great about competition (and, in particular, what's good about a large degree of competition)?

Answer 1

A market is said to be competitive when there are large number of buyers and sellers in the economy such that no individual can manipulate the prices and it adjusts itself via the market forces of supply and demand.
A large degree of competition is advantageous to the economy in many ways-

• It helps in allocation of resouces in a free market in cost effective ways.
• It helps in promoting an individual's well-being by giving liberty of choices, free association, better quality of goods, more variety, etc.
• It distributes economic power and helps in building a stronger democracy in the country. Thus, improving the standard of living as well.
• It boost innovation of new products, invention of new machines and more efficient way of productions to lower the production costs and thus increase profits.
• It is a great way to boost productivity and efficiency in the market and thus improve the economic conditions.