1: supply and demand definition
2: how supply-demand works
3: demand vs supply
4: example of supply and demand
Opening information:
Supply and demand breaks into two words, supply and demand.
Supply means of measurement of how much the available goods or services customers need.
Demand is a measurement of how much the customers need available goods and services.
So this article contains information about what is demand and supply, how supply and demand work, and what is main difference in demand and supply, Finally example about supply and demand.
1: supply and demand definition
Any price of the goods and services is not determined by themselves or by their own business. Instead, the prices are quite based on the economic inflow and outflow.
Also future product of any business would be determined by the customer needs.
Customer needs would be anything That solves people’s problems in any way.
So no matter what every one of the materials that survived in the economy, had some balance in the economy, so when the product got unbalanced there was a lot of change in the product’s price and economy.
Let’s say the country of United States oil is worth $0.99, and the oil is delivered to the USA for 1 dollar for nearly 2 years.
Suddenly lack of production and export problems, the oil price spiked to $9. This leads the consumer of the oil to purchase the oil very less.
Because lack of production of oil leads to the price, being very high, because there is less oil and more needs from more people.
This high oil price is called a demand. After 9 months of high oil prices, the need for the oils among the people became very low.
This makes the oil price very low because of the lower needs of people and lots of not consumed oils. This less need and high availability of unsold oils is called supply.
This same process of demand and supply is used for every Item used in the economy including the stock market. So now let’s dig into the demand and supply of the stock market.
2: how supply and demand works
The stock market is the main place to see the supply and demand of many types of Securities in the market.
The Securities are the stocks of shares of ownership, debt instruments, bonds, and derivatives.
All securities are shown based on supply and demand.
Say the Securities of Amazon shares are trading at $250 per share with a total of 1200 million shares outstanding.
This means Investors anyone who wants to buy an Amazon share would have to pay $250 even if the share’s worth is 100 dollars.
After 2 months, the Amazon stock is trading at $150 from the fall of $250. This doesn’t mean Amazon company making any low profits or running in loss now.
This means most of the investors who bought the stock would sell the stocks after two months. This makes sales of shares a high supply with no Investors to buy the shares.
Which leads to a fall in the stock from $250 to $150. In the next movement of 9 months, Amazon’s stock price reached $532.
It doesn’t mean Amazon company made any of the big profits in the last 9 months. It means the majority of the investors who sold the stocks before the 9 months, bought or bid the stock more than the last nine months.
This activity of consistent bids or buying requests leads the stocks in demand and makes the Investor pay any amount for Amazon shares. This makes the shares to rise from $150 to $532.
This up-and-down market happens in all the Securities of the entire stock market. The goal of the Securities chart is to not only show the price but also show the demand and supply of any specific securities.
Majority of the investors confuse supply and demand, so let’s dig into the difference between supply and demand in any type of security.
3: demand vs supply
Demands are the less securities with more buy Investors. Supply is more securities with fewer investors.
When any of the stocks are less available to Investors with more buyers, this big need from buyers is a demand.
On the other side when any of the stocks are more available to Investors with fewer buyers, this huge stock availability is a supply from the particular stock industry.
The key difference between demand and supply, if the stock rises there is demand with less supply. If the stock falls, there is less demand with high supply.
To make you more clear about supply and demand, let’s dig into the example of it.
4: example of supply and demand
If the stock A price is trading at $90 per share. After one-quarter of the 10q reports, Say the stock A is trading at 120 dollars.
This means there is high demand with less supply of stock A now. After the next two quarters, the stock A fall to $80. This means there is less demand with a huge supply of stock A.
Market rule: #100194
Supply and demand is considered to be a market rule, without supply and demand none of the stock trading would be performed trade among the investors plus it is not possible to run the whole operation of the stock market.
If your investors are not comfortable or align investing based on market rules please learn about how to regulate your investments under your control with the use of Rule investing.