Advantages:

(i) Optimal allocation of resources: Producers engage their resources only on those goods which appear to yield maximum profits.

(ii) Greater output and higher income: There is increase in production and productivity leading to increase in income, saving and investment.

(iii) Increase in efficiency: The presence of competition leads to a better use of resources to obtain cost advantage.

(iv) Progress and presperty: Intense competition promotes invention and innovation thereby bringing economic growth and prosperity.