Supply & Demand 101

How do the stocks prices goes down and up? it is because supply and demand affects the prices. Now, imagine you are in a room of 50 thirsty people and there is only one vendor that only sells 10 bottles of water. The vendor will be able to sell that 10 bottles to someone who is willing to pay more than usual because they are in demand. If the vendor have only 1 customer for that day, he is likely to sell is a lower price just to make a sale. If the customer and the vendor reach to a point where the price doesn't need to go up or down, the price have then reached to a level known as the "Market Price". But we all know that the market has various external effects on the products. For instance, if the supply of water bottles increase, the price will most likely reduce, and if there is an increase in population that needed water, the price will most likely increase.

So this works the same in the financial market, if you bought a share at a low price yesterday, and today there are 100 people who have a demand on that share, you will be able to sell that share at a higher price.

This is your Supply & Demand 101. For more info stay tuned.