What can increased competition potentially lead to regarding prices?

Increased competition in a market typically influences prices through the dynamics of supply and demand. When competition rises, it often encourages more firms to enter the market or existing firms to enhance their production levels to attract consumers. This increase in the number of sellers or the volume of goods available typically leads to greater supply.

As supply increases while demand remains relatively stable, the basic economic principle of supply and demand indicates that prices tend to decrease. Consumers benefit from lower prices because they have more choices and options available in the marketplace. This competitive pressure drives businesses to reduce prices to gain market share or maintain customer loyalty.

Therefore, the outcome of increased competition generally results in a decrease in prices as supply surges, making this the accurate interpretation of the economic principle at play.