competition in the market economy plays a decisive role, and that role has compiled Adam Smith in his principle of the "invisible hand."According to this principle, every single business entity, seeking benefits for themselves, regardless of their own will and consciousness, directed the so-called "invisible hand" of the market to achieve the benefits and benefits for society as a whole.
As the income of producers depends on how satisfied the interests of consumers, then there is competition in the economy over the limited purchasing power that exists in this market segment.A collection of all manufacturers, though managed by the "invisible hand" of their own free will and effectively implements all the interests of society, without even realizing.After all, competition in the economy, creates such conditions under which people produce what they can, those who are able to produce better or cheaper than others, and sell at a price lower than that which would appoint someone from thewho does not produce this product.
The word "competition" means:
1) From the Latin word concurrencia, which translates as "the face" - the competition for the most efficient use of natural and human resources.
2) The fight for the available capacity capable of paying for goods consumer demand, which is conducted on all the segments of the market available to the firm.
3) competition in the economy - opposed to individualism in it.
methods of competition - it's more advanced technology, diversity of product range, service, selling more advertising and higher quality product, lower price.The subjects of the economy - it is the company and the object - a limited amount of effective demand.
competition in the economy depends on the rate of growth in demand, the application of new methods of competitive struggle, increasing the number of participants in the game.It promotes the evolution of a market economy.
What are the functions it performs:
1) Comparative.Competition in the economy - is a versatile tool compare the effectiveness of different companies manufacture the same product.Firms production costs which exceed the market price for this type of product, go bankrupt.And those who are less - profit.In the event that costs are equal to the market price shall be reimbursed only the cost of resources, but there is still time to change the situation for the better.
2) Regulation.In order to withstand the competition, the firm must produce the goods that are currently in demand in the market, which means that resources are redirected to those sectors which are most in demand product at the moment.
3) motivation.Companies offering better products or lower cost, profit, and those who are not able to provide a decent quality or price - out of the game.
4) Innovation.During the competition will win the one with more varied and high-quality products, so it makes sense to introduce various innovations.
5) Control.The economic strength of any company controlled competition.The economy is going the way of the market, developed by natural selection among market participants.
6) Optimization.It provides the maximum level of utility to the consumer and maximum profits for the producer, which means that the market state it forms a stable social optimum.
But the competition has a negative effect:
1) It enhances the spontaneity and undermines stability.
2) and the risk of creating on the basis of the most successful companies of the monopolies that will control not only the economic situation, but with time, the political, that is to form the Institute for the oligarchy.
therefore for the stability and prosperity of society needed market economy system, but with strict control of the state, the best example - the Chinese economic miracle, where free competition, but public executions for corruption, as an attempt to build oligarchic structures.
