Firms compete by offering lower prices, better quality or new products
In a competitive market many firms sell similar products, and buyers can switch from one to another. Each firm tries to attract customers by offering lower prices, higher quality, or new products and services. Firms compete because each customer won brings in more revenue and more profit. Efficient firms offering the products consumers want at low prices do well, and inefficient ones do not.
Rivals keep prices down and give buyers more choice
A firm that charges more than its rivals for the same product loses customers to them, so competition holds prices down towards the cost of making the product. Consumers pay a lower price and buy a larger quantity than they would from a monopoly, which sells less at a higher price. With many sellers, buyers can also choose between brands, designs and levels of service.
For producers the same pressure means lower profits than firms can make in a market dominated by one or a few sellers.