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Economics Lecture Two (view source)
Revision as of 02:36, February 26, 2013
, 02:36, February 26, 2013→Price of Stocks
== Price of Stocks ==
== Price of Stocks ==
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'''''.
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'''''.
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.
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.