Final answer:
Competitive markets enhance the availability and affordability of goods and services. They work best under conditions of adequate competition, informed participants, resource mobility, and accurate pricing. When aligned, they lead to productive and allocative efficiency in the economy.
Step-by-step explanation:
Competitive markets maximize the availability of goods and services and the consumer's ability to buy them. Markets are vital institutions for the allocation of society's scarce resources, and this is a principle that has been highlighted in discussions about international trade, demand, and supply.
The efficiency of a market relies heavily on certain conditions. A free market economy functions optimally when there is sufficient competition, well-informed buyers and sellers, freedom for resources to move and prices that reflect the true production costs. When these conditions are met, the interaction between profit-maximizing firms and utility-maximizing consumers leads to an outcome that demonstrates both productive and allocative efficiency, ultimately satisfying the demands of the marketplace effectively.