What is the impact of competition on prices in the market?

What is the impact of competition on prices in the market?

Competition generally leads to lower prices as businesses strive to attract customers. When multiple companies offer similar products, they may reduce prices to gain market share.

Can you explain how this works in a monopoly situation?

In a monopoly, there's only one provider, which means they can set higher prices without fear of competition. This often leads to less choice and higher costs for consumers.

Are there any exceptions to this rule?

Yes, in some cases, competition can lead to higher prices, especially if companies engage in collusion or if there are significant barriers to entry that limit competition.

How does this affect consumers in the long run?

In the long run, healthy competition typically benefits consumers by keeping prices lower and improving product quality. However, if competition diminishes, consumers may face higher prices and fewer choices.