Compare
| Force | Effect on Price | Stock Market Example |
|---|---|---|
| Demand increases | Price rises | Earnings beat expectations, buyers rush in |
| Demand decreases | Price falls | Bad news, investors sell |
| Supply increases | Price falls | Secondary offering (more shares on market) |
| Supply decreases | Price rises | Share buybacks (fewer shares available) |
Key point
The equilibrium price is where supply equals demand. In the stock market, this changes every second as new information arrives and participants adjust their views.
Try it
Look at any ticker's **volume** bars on the chart. High volume at a price level shows where supply and demand found temporary agreement.
Key insight
Check-in
A product's price rises 10% and demand falls only 2%. What does this tell you about the business?
Check your understanding
Sit with the ideas.
A pharmaceutical company announces its new drug failed clinical trials. What happens to the supply and demand balance for its stock?
Why: