Final answer:
It is true that in vertical exchanges such as the stock exchange, prices change continuously based on the supply and demand, and in markets like the foreign exchange market, supply and demand can move simultaneously. Prices serve as mechanisms that convey information to market participants and reflect the interaction between demand and supply without central oversight.
Step-by-step explanation:
The statement that prices change continuously in vertical exchanges, such as a stock exchange, based on the matching of supply and demand is generally true. The foreign exchange market is a prime example where supply and demand are not fixed but move simultaneously, often due to expectations of future events or shifts in the exchange rate. This dual movement means that both the supply and demand for a currency can be affected at the same time, leading to a dynamic change in prices.
Moreover, the mechanism of price adjustments in markets, as outlined, demonstrates that in a market-oriented economy, prices are not determined by any central authority but rather emerge from the interactions of buyers and sellers responding to information conveyed through changes in demand and supply. Demand and supply models in such markets reflect the collective behavior of market participants, such as consumers' preferences and producers' pursuit of profit, making prices an effective social mechanism for allocating resources.
Nonetheless, in the short run, prices can be more volatile due to inelastic supply and demand, whereas in the long run, quantities tend to adjust more than prices because of greater elasticity, allowing for a clearer manifestation of underlying market forces.