Final answer:
True, the stock market experiences a general upward trend in the long run, known as a 'bull market,' but faces periods of decline or 'bear markets' in the short term due to market fluctuations and economic cycles.
Step-by-step explanation:
The statement 'The market always eventually goes up, but it's a rocky road along the way' is generally true but not guaranteed. Stock market prices do follow a long-term upward trend, as historical data shows. However, they experience volatility in the short term due to a variety of economic factors, business cycles, and investor sentiment. This phenomenon can be explained through the concept of a 'random walk with a trend,' which suggests that while prices can move unpredictably on a day-to-day basis, they tend to rise over extended periods.
Understanding the distinction between 'bull' and 'bear' markets is crucial. A 'bull market' is characterized by rising prices, whereas a 'bear market' features declining prices that may last months or years. For instance, during significant 'bull' periods, markets have achieved milestones, such as the DJIA exceeding 12,000 in 2000 and 17,500 more recently, while also experiencing setbacks during 'bear' periods, as in 1998 when the market fell 1200 points from its peak of 9,000.
The relationship between price and quantity in goods and services markets further illustrates market dynamics. While prices can fluctuate substantially in the short term, quantities might move more in the long run. This is related to the short-run inelasticity of supply and demand, which can make prices highly responsive to shifts in the market.