Q&A Prices in A Competitive Economy: The Forces Of Demand And Supply

Prices in A Competitive Economy: The Forces Of Demand And Supply


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n a competitive economy, the price of a commodity is not arbitrarily fixed, but through the interaction of the demand and supply nexus?

According to World Economic forum: a competitive economy is the set of institutions, policies and factors that determine the level of productivity of a country”.
One way to look at competitive Economy is to consider how the well-being of the people have improved overtime. A competitive economy, is of course a productive Economy. And productivity give room for growth, which in turn leads to income levels and hopefully, at the risk of sounding simplistic, improved well-being.
The laws of demand and supply just like in every other economy also plays a vital role here. It’s a basic knowledge in l economic principles that when supply is higher than demand for a good or service, the prices of the said goods and services will fall and when demand exceeds supply, prices will increase . … However, when demand increases and supply remains the same, the higher demand leads to a higher equilibrium price and vice versa.
Understanding supply and demand is easy. The headache is understanding what makes people like a particular product and dislike the other. This comes down to understanding what news is good news for a company and what news is bad. There are many answers to this problem and just about any investor you ask has their own ideas and strategies.
The forces of demand and supply determines price through their interactions
Which supports your statement
However not in all situations… there is always an exception to every law
The government can decide to fix the price of essential commodities whining a particular range when its perceived that market failure may exist
Simply put when a buyer decides to pay less than actual. Mostly common in the agricultural sector where products are been bought from farmer at a very low rate due to the size or economical strength of the buyer at times in monopsony
And the other way round…..
In conclusion price are not abitrarly fixed however remember all the laws are models to represent the reality but not every part of reality can be incorporated in a model.

1 thought on “Prices in A Competitive Economy: The Forces Of Demand And Supply”

  1. Thanks again for the article. Really Cool.

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