Answer
See explanation
Work Step by Step
Daily equality of trades
- Yes, in the stock market, every share sold is simultaneously bought.
- This ensures that quantity demanded = quantity supplied at the current market price.
- So at the end of each trade, the market is “cleared.”
Why prices still change?
Prices change because the demand or supply curves themselves shift, not because of an imbalance at a given price.
Examples of factors that shift demand or supply for a stock:
- New information about the company (earnings, management changes) → demand increases → price rises.
- Changes in investor preferences → supply or demand shifts.
- Macroeconomic news or interest rate changes → affect expected returns → shift demand.
At the old price, the new demand or supply would not equal the old price → the market adjusts the price so that the new quantity demanded = new quantity supplied.
