A-Z Popular Blog Markets Search »
Moral Hazard

Economic Problems

Economic Problems

What is a Competitive Market?

 , updated on
A competitive market is an open, fair and liquid market for assets, securities, goods or labor.

Market Liquidity

Market liquidity is a term for the trading volumes on a market. Generally speaking, a market with many independent buyers and sellers closing many transactions is more competitive than a market with low trading volume. A competitive market typically has such high trading volumes that a single buyer or seller has little influence over price.

Perfect Competition

Perfect competition is a theoretical type of market that is so efficient that every participant must accept a market price. This means that all goods are commodities such that consumers see no difference between brands. This generally doesn't happen as many firms work to establish a competitive advantage to stand out in the market such that they don't need to accept a market price.

Perfect Information

In order to have perfect competition, you need perfect information whereby all market participants have the same set of facts that are relevant to a transaction at a point in time. In reality this rarely happens, for example a seller of a home typically knows much more about the home and neighborhood than the buyer.

Competitive Advantage

Competitive advantage is a capability or asset that allows a firm to stand out in a crowded market. For example, a luxury fashion brand that is able to charge a premium price based in its reputation and brand image.

Efficient Market Hypothesis

The efficient market hypothesis is a theory about the stock market that suggests that it is impossible to beat the market as prices always perfectly reflect the probable future earnings of a firm. This assumes that all buyers and sellers have the same information and level of market access such that nobody has any advantage. According to the efficient market hypothesis, individuals who beat the market are simply examples of random chance. In other words, you can get lucky on markets but you can't outthink the collective intelligence of an efficient market.

Mr Market

Mr Market is an analogy for the market meant to convey the common observation that the market isn't efficient. It suggests that the market is a noisy and moody neighbor who offers to sell you his house everyday. The price swings wildly from day to day based on Mr. Markets moods. Sometimes he goes on a prolonged period of irrational exuberance whereby his prices are consistently high. At other times, he is depressed and willing to sell low.

Free Market

A free market is an idealized market where entities trade without government intervention. Prices and quantities are set by supply and demand driven by the self-interested decisions of buyers and sellers. In this idealized market, despite everyone's self-interested motivations the market works well and efficiently allocates the resources of a nation.

Anti-Competitive Practices

A pure free market doesn't function very well because there are many ways that market participants small and large can hinder competition to gain an advantage at the expense of everyone else. Generally speaking, a market requires a well designed and regulated system to function efficiently. Most markets are driven by the self-interested motivations of buyers and sellers with a few rules in place to make things run more smoothly.

Market Equilibrium

Market equilibrium is a state of balanced supply and demand. The prices and output quantities of a competitive market are typically close to equilibrium. In a perfectly competitive market, supply always equals demand. As such, there are never shortages or surpluses and prices perfectly reflect the economics of production and value.
Overview: Competitive Market
An open, fair and liquid market for assets, securities, goods or labor.
Related Concepts


This is the complete list of articles we have written about economics.
Added Value
Advanced Economy
Adverse Selection
Animal Spirits
Attention Economics
Bank Reserves
Bargaining Power
Barriers To Entry
Behavioral Economics
Behavioral Finance
Bounded Growth
Bounded Rationality
Business Cluster
Business Value
Capital Flight
Capital Goods
Category Killer
Circular Economy
Club Theory
Comparative Advantage
Competitive Parity
Cost Competition
Critical Mass
Customary Pricing
Deadweight Loss
Division Of Labor
Economic Activity
Economic Advantage
Economic Bad
Economic Conditions
Economic Context
Economic Development
Economic Growth
Economic Infrastructure
Economic Problems
Economic Sector
Economic Systems
Economic Theories
Economies Of Density
Economies Of Scale
Excess Burden
Experience Economy
Extreme Value Theory
Factors Of Production
Failure Demand
Fiscal Dominance
Food Sovereignty
Free Market
Gains From Trade
Giffen Good
Happiness Economics
Income Distribution
Industrial Complex
Industrial Economy
Inferior Good
Information Asymmetry
Intangible Goods
Intangible Value
Invisible Hand
Knowledge Economy
Labor Productivity
Long Tail
Marginal Utility
Market Conditions
Market Economy
Market Failure
Market Forces
Market Power
Marketing Economics
Mean Regression
Media Economics
Merit Good
Middle Class
Monetary Policy
Plateau Effect
Predatory Pricing
Price Economics
Price Umbrella
Price War
Pricing Strategy
Profit Motive
Rational Choice Theory
Rent Seeking
Rule Of Three
Search Good
Service Economy
State Capitalism
Sticky Prices
Superior Good
Superior Goods
Supply Shock
Sustainable Economics
Switching Barriers
Threat Of Substitutes
Trade War
Traditional Economy
Uneconomic Growth
Unsought Goods
Value Creation
Veblen Goods
Zero-sum Game
If you enjoyed this page, please consider bookmarking Simplicable.


A definition of markets with examples.

Efficient Market Hypothesis

An overview of the Efficient Market Hypothesis.

Two-sided Market

A definition of two-sided market with examples.

Market Failure

The definition of market failure with examples.

Free Market

A complete overview of free markets.

Market Forces

The primary forces that shape competition in a market.

Threat Of Substitutes

The definition of a threat of substitutes with examples.

Gig Economy

A complete overview of the gig economy with examples.


The definition of barter with examples and comparisons.


Everyday examples of economics.


An overview of economic scale with examples.

Trade War

An overview of trade wars with examples.

Market Conditions

The common types of market conditions.


The definition of macroeconomics with examples.

Information Economics

The definition of information economics with examples.

Traditional Economy

A complete overview of traditional economies with examples.

Developed Country

The definition of a developed country with an overview of common characteristics.
The most popular articles on Simplicable in the past day.

New Articles

Recent posts or updates on Simplicable.
Site Map