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The most powerful force that dictates general conditions of the market functioning is the level of development of competitive relations on it. Etymologically, the word “competition” comes from the Latin “concurrentia”. It means “collision” or “competition”. However, there are significant differences in the interpretation of the idea of competition. First and foremost according to the level of its development, the society internationalizes the ability of its economic entities to ensure national progress in a competitive mode, involving the full mobilization of skills and abilities of each person.
From Economic Angle
First of all, there is a determination of competition from the purely economic angle, and it is very widespread. The Nobel Laureate of the Institute of Technology (USA), Paul Samuelson treats competition as a means of combining knowledge and actions of millions of different individuals.
Campbell R. McConnell and Stanley L. Brue, the two authors of the famous book Economics, have made a great contribution to the sphere of global economics. Campbell R. McConnell obtained the degree of Doctor of Philosophy at the University of Iowa after studying at the Cornell College and the University of Illinois. He is also the co-author of the book Modern Labor Economics.
Stanley L. Brue obtained his Ph.D. at the Augustine College (South Dakota). He is the co-author of the book Economics Essentials, Modern Labor Economics, and the author of the book The Evolution of Economic Thought.
These authors stick to the economic approach to the definition of the concept of competition in the following two conditions:
- the presence of a large number of independently acting buyers and sellers of any particular product or resource on the market;
- the freedom for buyers and sellers to act on those or other markets or to leave them.
So, the market competition is the struggle for limited consumer demand, waged between firms on the available parts at the market.
The competition is the rivalry between manufacturers of the most profitable spheres of investment, markets, and sources of raw materials. At the same time it is a very effective mechanism for regulation of social production proportions. It is generated by the objective conditions: the economic isolation of each manufacturer, its dependence on the market situation, confrontation with other commodity owners in the struggle for customer demand.
Historically, competition has arisen in terms of simple commodity production. Every small manufacturer sought to create the most favorable conditions of production, and distribution of goods to the detriment of other participants in the market exchange. The increasing dependence on small manufacturers from the market and market fluctuations in prices of goods they produced were taken into account. Hence there was an opportunity to strengthen the economy and labor exploitation. So, the capitalist competition arose.
In modern conditions, competition also serves as an important tool for production development . It exists in different forms. The key role of competition in the market economy was the generalized “invisible hand” principle of Adam Smith. According to it the individual, striving for its own benefit, independently of its will and consciousness, is directed to the achievement of advantages and benefits for the whole society as an “invisible hand” of the market. Dependence of the income on the degree of satisfaction of consumers’ interests makes a manufacturer compete with other producers for a limited purchasing power.
The set of manufacturers is driven by the “invisible hand”. Actively, effectively, and voluntarily they implement the interests of the whole society, and often without even thinking about it, and pursuing only their own interests.
Competition creates a situation in which these points will be carried out:
- firstly, someone can produce something;
- secondly, it will be made by those who can do it, as cheaply as it is possible;
- thirdly, it will be sold at a lower price.
The society understands the importance of competition. It stimulates the activity of independent units. Through it, manufacturers monitor each other. Their struggle for the consumer leads to lower prices, reducing production costs, improving product quality, strengthen scientific and technological progress.
While analyzing the role of competition, it is necessary to take into account its negative aspects. Competition makes the contradictions of economic interests sharper, extremely enhances the income differentiation in society, causes the growth of overhead, and encourages the creation of monopolies. It can happen that some entrepreneurs, united in a monopoly, can unreasonably increase the price of their goods or services. Such methods of a successful business are anti-human. They not only violate moral norms, they act against them and the state.
This brings to mind the words of D. Sarnoff, who said that competition provides the best quality of products and develop the quality of the worst people. We have a deep respect for those who lead a civilized competition.
Let us answer the question if the rivalry spoils people. We can say, that there are two sides of the coin. So, on the one hand, competition spoils people by turning them into those who are ready to do anything for money. On the other hand, we do not agree with this statement, we think that competition can improve people skills, reveal their abilities and talents.
To prove our point of view, here is the following example. The American entrepreneur Henry Ford put car production on the conveyor in order to improve sales and make the product more affordable for the population. He did not use unfair methods of struggle for the consumer and introduced an innovation that helped him to achieve his goal.
So, a healthy competition can have a positive impact on the economy in general. Thanks to a rivalry, it is possible to find new ways of solving problems of limited resources. However, sometimes, entrepreneurs go too far in their pursuit of the profit, though eventually it becomes a well-known fact and the entrepreneur faces punishment. That, in turn, becomes a lesson for other entrepreneurs who want to follow a dishonest way.
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