Consumer rivalryĪ competitive market creates competition among consumers. In this case, the company may raise the price of the popular TVs once the stock reaches a predetermined number.

Each television sold means there's one less available for the next consumer. This allows a company to increase prices due to less stock, or as an incentive to increase production.Įxample: A business produces 200 large screen televisions and sets a competitive price of $800 each. Diminishing supplyĪs companies produce products and consumers purchase the product, supply diminishes over time. This action may lead to similar start-ups offering similar products to compete with the original seller and make a profit of their own. If a start-up company determines the market is willing to pay for its product and there are many potential customers, they enter the competitive market.

Focus on profitĬompanies go into business for the opportunity to sell a product or service and make money. The 10 characteristics of a competitive market include: 1. When a business considers changing the price of a product, it often analyzes the competition to gain insight into their strategies. Competition ensures a continuous supply and demand for the entire market-not just a single business or consumer. Related: Competitive Advantage: Definition and Examples Characteristics of a competitive marketĬompetitive markets have several characteristics that make them what they are. The farmer then determines how much to grow based on projected sales. One year, wheat may sell for $6 a bushel and the following year, bumper crops increase supply and reduce demand so the price lowers to $5 per bushel. In this structure, competitive market producers are price-takers who accept the market price since independent price changes can cause a sales loss.Įxample: Agriculture is a price-taker industry whose price-taker farmers sell their harvest for the price the market is willing to pay. In a perfectly competitive market, multiple influences decide market prices and, therefore, market supply. Since a competitive market means the producer must be willing to sell a product according to what the market pays, supply curves adjust to keep the producer's costs relative to its sales. Its response to supply and demand fluctuates with the supply curve, a representation of a product's quantity. A competitive market is a structure in which no single consumer or producer has the power to influence the market.

Competition market vs monopoly examples