Competition – where firms compete for the patronage of buyers – is the bedrock of a healthy economy. Competition keeps prices low and innovation high.
The spectrum of competition runs from "perfect competition" on one end, to monopoly on the other. Perfect competition is a theoretical ideal wherein firms cannot affect the market prices of their products, firms can freely enter and exit markets, and buyers have complete information. In practice, we see variations of "imperfect competition", where buyers have bounded rationality, firms set their own prices, compete for market share, and contend with barriers to entry and exit.