Lesson 14 Discovering the Law of Demand Amount you pay for one cup of Stomping Grounds Coffee 1 2 3 4 Total 10 5 4 3 2 1 0 free coupons Lesson 14 How are Stock Prices Determined ID: 561563
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How Are Stock Prices Determined?
Lesson 14Slide2
Discovering the Law of Demand
Amount
you pay for one cup of Stomping Grounds Coffee
1
2
3
4
Total
$10$5$4$3$2$1$0 (free coupons)
Lesson 14 – How are Stock Prices Determined?
Slide 14.1Slide3
Discovering the Law of Supply
Amount
you would receive as wages for one hour of work
1
2
3
4
Total
$30$25$20$15$10$0 (volunteer)Lesson 14 – How are Stock Prices Determined?Slide 14.2Slide4
The Laws of Demand and Supply
Law of Demand:
At lower prices, people choose to buy more. At higher prices, people choose to buy less.
Law of Supply:
At higher prices, people choose to produce more. At lower prices, people choose to produce less.
Lesson 14 – How are Stock Prices Determined?
Slide 14.3Slide5
Classroom Tally Sheet
Price
Round 1
Round
2
Round 3
$50
45
40353025201510$5Lesson 14 – How are Stock Prices Determined?
Slide 14.4Slide6
Supply and Demand for
Mighty Wings, Inc. Shares
Lesson 14 – How are Stock Prices Determined?
Slide 14.5Slide7
Change in Demand for
Mighty Wings, Inc. Shares
Lesson 14 – How are Stock Prices Determined?
Slide 14.6Slide8
Change in Supply for
Mighty Wings, Inc. Shares
Lesson 14 – How are Stock Prices Determined?
Slide 14.7Slide9
The Role of Expectations
Demand in Stock Markets
People are more likely to buy stock in a given company if the have positive expectations regarding the success of that company.
They might expect:
The share price to increase.
An improved dividend payment.
Supply in Stock Markets
People are more likely to sell stock in a given company if they have negative expectations regarding the success of that company.
They might expect:The stock price to decrease in response to changes in the industry, world events, or other uncertainties.The dividend to decrease.Better opportunities to purchase other stocks, bonds, or other types of investments.Lesson 14 – How are Stock Prices Determined?Slide 14.8Slide10
Review of Supply and Demand
Lesson 14 – How are Stock Prices Determined?
The law of demand states (regarding stocks) that buyers choose to purchase more shares at lower prices and fewer shares at higher prices, all else constant.
The law of supply states (regarding stocks) that sellers choose to sell more shares at higher prices and fewer shares at lower prices, all else constant.
An equilibrium price exists when the quantity of shares demanded at that price equals the quantity of share supplied.
Stock prices change as a result of changes in the supply of and demand for shares of the stock in question.
Slide 14.9