competitive market forces respond to changing conditions

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Date of SubmissionCompetitive Market Forces
For a successful business undertaking, the entrepreneur has to be aware of the market economies. This will ensure that they will be in a position to identify the different market systems. It is vital that the business has knowledge of the industry in which the company belongs to and the market conditions affecting its operation as a result of being affiliated to that line of production. The perfect competition model is one of such market economies and is characterized by many seller and buyers in the marketplace. A competitive market is subject to the market forces of demand and supply, and this will affect the pricing strategy such that it matches the equilibrium price set by the market (Makowski, & Ostroy, 2001). This is why companies operating in a perfectly competitive market are said to be price takers as adjusting their price above or below the one set by the market could produce adverse consequences for the firm.
The pricing mechanism will be adjusted depending on the changes in the number of commodities supplied and demand in the marketplace. Both the law of demand and supply influence the price tag attached to goods and services. An increase in the demand will lead to a shift in the equilibrium point where the price decreases and the vice versa happens when a there is a decrease in the quantity demanded by the consumers in the marketplace. Imposition of taxes and the rise in the factor price will increase the cost of production hence hiking the price of commodities and in the process reducing the quantity demanded.

An excellent example of companies in a perfectly competitive is the agriculture sector where there are many suppliers and buyers of the commodities (Makowski, & Ostroy, 2001). Moreover, the price of the product is determined by the market forces of demand and supply ceteris paribus.
Work Cited
Makowski, L., & Ostroy, J. M. (2001). Perfect Competition and the Creativity of the Market. Journal of Economic Literature, 39(2), 479-535.