Concept
Market adjustment refers to the process in which market forces such as supply and demand, competition, and consumer preferences lead to a reallocation of resources and changes in prices towards an equilibrium state. This process ensures that markets remain efficient by correcting mismatches between supply and demand, ultimately guiding resources to their most valued uses.
Relevant Fields:
Concept
Supply and demand is a fundamental economic model that explains how prices are determined in a market based on the availability of goods (supply) and the desire for them (demand). When demand exceeds supply, prices tend to rise, and when supply exceeds demand, prices tend to fall, reaching an equilibrium where supply equals demand.
Concept
Economic equilibrium is a state where market supply and demand balance each other, resulting in stable prices and quantities. It is a fundamental concept in economics that signifies a situation where no participant has the incentive to change their behavior, as all potential gains from trade are realized.
Concept
Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. It is a crucial concept for businesses and policymakers to understand consumer behavior and make informed pricing and economic decisions.
Concept
Market efficiency is the degree to which stock prices reflect all available, relevant information. In an efficient market, it is impossible to consistently achieve higher returns than average without taking on additional risk, as prices already incorporate and respond to new information instantly.
Concept
Resource allocation is the strategic distribution of available assets to various projects or departments to optimize efficiency and achieve organizational goals. It involves decision-making processes to ensure that limited resources are used effectively to maximize output and minimize waste.
Concept
Consumer preferences refer to the subjective tastes and priorities of individuals that influence their purchasing decisions and are shaped by various factors such as cultural, social, psychological, and economic conditions. Understanding these preferences is crucial for businesses to effectively tailor their products and marketing strategies to meet the needs and desires of their target audience.
Concept
Competition is a fundamental economic and biological principle driving innovation, efficiency, and adaptation by encouraging entities to improve and differentiate themselves to gain an advantage. It can lead to both positive outcomes, such as technological advancements and consumer benefits, and negative consequences, such as monopolistic practices and environmental degradation.
Concept
Price mechanism is the process by which the forces of supply and demand interact to determine the market price and quantity of goods and services. It serves as a signal to both producers and consumers, guiding resource allocation and economic decision-making in a market economy.
Concept
Concept
Market clearing occurs when supply equals demand, resulting in an equilibrium where there is no excess supply or demand. This balance ensures that resources are allocated efficiently, and all goods produced are sold at the market price.
Concept
Short-run equilibrium in economics occurs when the quantity demanded equals the quantity supplied, but firms may not be operating at their full capacity. It is a temporary state where some inputs are fixed, and firms can make supernormal profits or losses due to price and cost structures that have not yet fully adjusted to market conditions.
Concept
A correction mechanism refers to processes or systems implemented to align outcomes with expectations or to rectify deviations, ensuring that objectives are consistently met. These mechanisms are crucial in various fields, including economics, where they stabilize markets, or in biological systems, where they maintain homeostasis.
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