In 1723 to 1790 when is Adam Smith born is the time of mercantilism which is an old economic theory that argues the true wealth of a kingdom is directly related to the amount of gold and silver was the prevailing economic system. According to Adam Smith’s argument, he said that government should stay away to the market. Due to the competitive of the market, the price of consumer goods will not increase to an unreasonable amount, because the firms need to stay competitive. However, in monopolized or oligopolized markets, it would not appear because there just is one or few competitors in the markets, the prices have been controlled by the competitors that lead the buyers do not have much money to buy the other thing.
In perfectly competitive market, there are a large number of sellers and buyers, they can free entry and exit.
In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so. (The Wealth Of Nations, Book II, Chapter II, p.329, para. 106.)
According to this quota, when the market is stay in perfectly competitive, sellers can freely enter the market. They are selling homogeneous goods which are regarded as identical by buyers. These goods are substitutes for each other. In a perfectly competitive market, buyers regard the goods sold by different sellers as homogeneous. Therefore, they do not have preference for the goods provided by a particular seller. There is also imformation on all aspects of the market is readily available. Sellers and buyers are fully informed of the price, quantity, ect. of goods. Therefore both parties can quickly respond to any changes in the market.
Earning money is the aim of sellers, they will not increase the price in unreasonable.
Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the...