What is a competitive market balance?
Competitive market balance is an economic concept that describes in detail the relationship between consumers' demand and the offer of manufacturers. At a certain point, the supply is equal to the demand and forms a price for a specific good or service and this point is called balance. If there are changes in supply or demand levels, the price point either increases or decreases in accordance with these changes until the balance is reached again. The concept of a competitive market balance relies on the free market with many companies selling goods in an effort to profit, unlike a monopoly with one company controlling or the market controlled by a centralized government.
Free markets are economic markets where many manufacturers create goods and services for people who can buy. Consumers have a choice in these markets, what goods you can buy and what price comfortably for these products. All these activities result in an in point where price levels are stabilized according to supply and demand. At this point, the competition is achievedrises market balance.
The easiest way to see how competitive market balance is achieved is to study a graph showing the level of production of a particular product, the price for which they are sold, and consumer demand for this product. The lines on the chart show an offer and demand can rise and decrease depending on price changes. At some point, these lines intersect, which will lead to a balance between supply and demand.
changes in the levels of supply and demand can affect the competitive market balance. For example, a sudden increase in demand for a particular product will cause companies to increase production to satisfy excessive demand. In order to deal with the cost of increased production, companies will increase the prices of the product. At a certain level, higher prices will be keep consumers from purchasing and demand, which will leave an excessive supply. Prices will drop back until a new balance is achieved.
suchThe harmonious relationship between supply and demand exists only in a competitive Marekt. As a result, a competitive market balance will not be reached on a market that has no perfect competition. Any economy where production and prices are set by a centralized government lacks a balance. In addition, the market, dominated by one or several companies, will not have a balance, mainly because dominant companies will have a greater leverage effect to determine the price points that consumers must accept.