Why is competition important for the efficient use of resources?

Competition is driven by scarcity, and they save a directly proportional relationship. We can understand this relationship by comparing it with the route source, demand and supply share an inversely proportional relationship. Demand-and-supply equilibrium forces are price-setting, which is why competition is important for the efficient use of resources.

Competition exists in both supply and demand sides. For example, tea processors buy raw stuff from the same producers. When the processors are many, the tea farmers experience more demand and sell at higher prices to leverage value for their skills. Therefore, tea processors are determined to lower production costs by finding ways to maximize the little ration and increase productivity.

When the demand for processed tea is high, the supply-side isn't likely to expand as quickly as the prices rise. The processors aim at getting the most returns from their investments. Therefore, they try selling at the highest price possible. If the competition is stiff on the demand-side, suppliers enjoy producers' surplus, but if the competition is stiff on the supply-side, consumers enjoy the consumers' surplus.