Business competition is the guiding factor for reaping benefits in any business; this was the belief of Adam Smith and it was propounded by him some two hundred years ago and still acts as the base in order to comprehend how market economies function
Adam smith, in his book ‘wealth of nations’ states that it’s not out of benevolence (generosity) of the butcher or a baker that we eat bread or meat, it’s out of the self-interest of the traders that they produce goods in order to earn profits and eventually that product is valid to us due to necessity. So, self-interest of a trader is one of the factors that promote trade. He also states that competition in markets regulates the trade.
If the price of the good is too high, then the goods of the competitor which are cost effective are preferred. Consumers being treated rudely than the competitor, then the goods of the competitor are preferred. So, it’s the competition that regulates the trade.
Self-interest and the Competition in markets are termed to be ‘invisible hand’ which determines the function of the market economy.
