Changes

== Price of Stocks ==

== Price of Stocks ==

The price of a company’s stock reflects the price at which people are willing to sell it (the supply price) and the price at which other people are willing to buy it (the demand price).  A "sale" of the stock occurs only when the '''''supply price equals the demand price'''''.

The price of a company’s stock is a compromise between (i) the price at which people are willing to sell it (the supply price) and (ii) the price at which other people are willing to buy it (the demand price).  A "sale" of the stock occurs only when the '''''supply price equals the demand price'''''.

Stock prices on the New York Stock Exchange and NASDAQ (the stock exchange for new and often high-tech companies) are determined entirely by the “bid” and “ask” prices of the buyers and sellers.  Someone will “bid” a certain amount to buy a stock, and a seller will “ask” for a certain price.  When the bid and ask amounts equal, then a sales transaction occurs.  Prices can move very quickly and unpredictably when millions of people are involved.  When the overall trend of most stocks from day-to-day is an increase in their prices, then it is known as a "bull market"; when the overall trend of stocks from day-to-day decreases in price, then it is known as a "bear market."  You can remember that by thinking of how bears are scary, and stock markets that crash in price are scary things.

Specifically, stock prices on the New York Stock Exchange and NASDAQ (the stock exchange for new and often high-tech companies) are determined entirely by the “bid” and “ask” prices of the buyers and sellers.  Someone will “bid” a certain amount to buy a stock, and a seller will “ask” for a higher price.  When the bid and ask prices are equal, then a sales transaction occurs.  Prices can move very quickly and unpredictably when millions of people are involved.  When the overall trend of most stocks from day-to-day is an increase in their prices, then it is known as a "bull market"; when the overall trend of stocks from day-to-day decreases in price, then it is known as a "bear market."  You can remember that by thinking of how bears are scary, and stock markets that crash in price are scary things.

As explained above, the price that a stock trades on the exchange is where the “supply” by sellers equals the “demand” by buyers.  When a seller of stock asks too high a price, then there are no buyers and the stock does not trade.  When a buyer of stock offers to pay too little a price, then there are no sellers at that low price and the stock does not trade.  The transaction (trade) occurs only when SUPPLY EQUALS DEMAND.   

As explained above, the price that a stock trades on the exchange is where the “supply” by sellers equals the “demand” by buyers.  When a seller of stock asks too high a price, then there are no buyers and the stock does not trade.  When a buyer of stock offers to pay too little a price, then there are no sellers at that low price and the stock does not trade.  The transaction (trade) occurs only when SUPPLY EQUALS DEMAND.   

This important principle of transactions occurring where "supply meets demand" is the most basic concept in all of economics.  Let's discuss it further.

This is the most basic concept in all of economics:  '''''transactions occur only where "supply meets demand."''''' Let's discuss this further.

==Supply and Demand==

==Supply and Demand==