Your investing questions, our clear answers.

Our response:

A company’s share price is determined by supply and demand based on buyers and sellers who want different prices. Supply is the total number of shares that people want to sell. Demand is the total amount of shares that people want to buy.

If there are more buyers (demand) than sellers of the stock, the buyers bid up the prices of the stock to motivate sellers to get rid of them. The reverse happens if there are more sellers (supply) for the stock than there are buyers. As more owners sell, the holder of the stock lowers the price to entice a buyer to purchase the stocks since there is now more supply than demand.

Why there might be more buyers for a stock than available supply could be based on a number of factors such as a positive outlook for the company, confidence in the market place or economy or that the company’s share price will go up over time.

Learn more about factors that can affect stock prices.