Principles of Economics by Carl Menger Chapter 5.3C - Competition Policy

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What does competition really change in a market? In this video, we explore Carl Menger’s Principles of Economics, Section 5.3C: The Effect of Competition on Prices and Supply.
At first glance, it might seem like it doesn’t matter whether one seller or many offer a product—if the total supply and price stay the same, so will the outcome. But Menger shows that true competition changes everything.
When a monopolist controls the market, they can restrict supply to raise prices, or sell to different social groups at different prices to maximize profits. But the moment real competitors enter the scene—each acting independently—those tactics fall apart.
A competitor who tries to destroy part of their stock to push prices up will simply lose market share to others. And sellers who aim only at wealthy buyers get undercut by competitors selling to the masses. As a result, prices fall, access expands, and wasteful practices vanish.
More importantly, competition increases overall production. Where monopolists hold back output, multiple competing sellers flood the market, making goods more available to all. It pushes producers to serve more people, cut costs, and innovate.
In short, Menger explains that competition doesn’t just affect prices—it transforms market structure, boosts efficiency, and spreads prosperity. This section offers a timeless defense of why free markets matter—and how competition ensures economic goods reach the widest number of people.

❓ Questions This Video Answers:
-How does competition affect market prices?
-Why can’t sellers destroy supply in competitive markets?
-What happens when monopolies try to segment buyers?
-How does competition change production levels?
-Why does competition expand access to goods?
-What role do incentives play under competition?
-Why do prices drop in competitive markets?
-How does competition increase efficiency?
-What business practices disappear with strong competition?
-Why is competition key to reaching lower-income buyers?

00:00 - Introduction to Competition Policy
00:12 - Competition vs Monopoly—Setting the Stage
00:54 - When Competition Actually Matters
01:36 - Competition Prevents Withholding and Manipulation
02:31 - Eliminating Harmful Monopoly Practices
02:56 - The Broader Benefits of Competition
03:50 - Motivation, Efficiency, and Social Reach
04:26 - Conclusion

#FreeMarkets #CompetitionMatters #CarlMenger