How the Price of Stock

Is SetIs Set

Stock Buyers/Sellers

Supply and Demand

� In any market or store there are

prices for each product being

bought or sold.

� The buyers and sellers of these

products have a say in the price, in

that the price is set by the sellers’

The Stock Market Revisited

that the price is set by the sellers’

willingness to sell and at what price (supply); and the

buyers’ willingness to buy and at what price (demand).

� Eventually, the price that the seller is willing to sell at will

equal the price that the buyer is willing to buy at.

� This price is called the market price. The market price is

constantly fluctuating due to supply and demand.

� Supply and demand is real in terms of stock

prices. Stock sellers represent the supply and

stock buyers represent the demand.

Supply and Demand

� If there are a � If there are a lot of buyers

� If there are a lot of sellers out there and little buyers, then the price of stock will go down.

lot of buyers out there and a few sellers, then the price of stock will rise.

$ $

EXAMPLES OF

SUPPLY AND

DEMAND

� Too Many Sellers – Little to No Buyers

• When Enron Corporation was exposed for their

fraudulent business practices, holders of their

stock tried to sell off their shares. However, there

were no buyers out there, thus the price of Enron

Example 1:

were no buyers out there, thus the price of Enron

stock plummeted.

� Too Many Buyers – Little to No Sellers

• Apple Computer shares were once trading at $14

per share. However, with the recent success of

Apple's Ipod and other hot products, the share

price has skyrocketed to over $100 per share. This

Example 2:

price has skyrocketed to over $100 per share. This

rise in price is due to the high demand of this

stock.

$14

$100