What is supply and demand law ?

Did you ever wonder why the price of a stock goes up or down?, does it have some reason or not?

This article will clear your doubts about the price movement of a stock.

Supply and demand is one of the reasons for the movement of the price. Supply refers to how many people are willing to sell the stock and demand refers to how many people are willing to buy the stock.

There are 3 cases

1 EQUILIBRIUM: This is the case in which the demand is equal to the supply i.e. the number of people willing to sell the particular stock is equal to a number of people willing to buy the particular stock. This means that there is no surplus or shortage of goods which means that the stock price will remain the same. The price will increase/decrease only when people think that price of the particular stock is higher/lower then it is at present so to bring the price to that value they will be willing to buy/sell a particular price.

2 High demand and lower supply: This is the case in which the demand for a particular stock is higher than the supply, thus there is no equilibrium. In this case, buyers are willing to pay more and more price for the stock so they tend to drag the price of the particular stock higher as a result the price increase.

3 Higher supply and lower demand: In this case, the supply is higher than demand. People are willing to sell their stock at a lower and lower price thus dragging the price down which results in bringing the price of stock lower.

These are the cases which you will experience not only in the stock market but in real life also for example if there is the shortage of some item then people are willing to but it at a higher price then the actual price, same is true when the demand is not much but the supply is higher which results in decreasing the price of the particular item.

Hope you like the article. Please comment what are other cases you like to include in the article.