Wednesday, October 17, 2007

Stock price fluctuations

The price of a stock fluctuates fundamentally due to the theory of supply and demand. Like all commodities in the market, the price of a stock is directly proportional to the demand. However, there are many factors on the basis of which the demand for a particular stock may increase or decrease. These factors are studied using methods of fundamental analysis and technical analysis to predict the changes in the stock price. A recent study shows that customer satisfaction, as measured by the American Customer Satisfaction Index (ACSI), is significantly related to the stock market value. Stock price is also changed based on the forecast for the company and whether their profits are expected to increase or decrease.

Supply and demand
In economics, supply and demand describe market relations between prospective sellers and buyers of a good. The supply and demand model determines price and quantity sold in the market. The model is fundamental in microeconomic analysis of buyers and sellers and of their interactions in a market. It is also used as a point of departure for other economic models and theories. The model predicts that in a competitive market, price will function to equalize the quantity demanded by consumers and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity. The model incorporates other factors changing such equilibrium as reflected in a shift of demand or supply.

Contents [hide]
1 Fundamental theory
2 Supply schedule
3 Demand schedule
4 Changes in market equilibrium
4.1 Demand curve shifts
4.2 Supply curve shifts
5 Elasticity
6 Vertical supply curve (Perfectly Inelastic Supply)
7 Other markets
8 Other market forms
9 Positively-sloped demand curve?
10 Negatively-sloped supply curve
11 Empirical estimation
12 Macroeconomic uses of demand and supply
13 History
14 References
15 See also
16 External links

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