Lesson 3 Part 1 – Stock market Quiz questions: Basic principles of supply and demand in stock trading
Taking a quiz on the basic principles of supply and demand in stock trading can be a great way to test your knowledge and understanding of these important concepts. Not only can it be a fun and engaging way to learn, but it can also help you identify any areas where you may need to brush up on your knowledge.
Do the test:
Results
#1. What is the law of supply and demand?
b) The lower the price, the higher the quantity demanded and the lower the quantity supplied
The law of supply and demand is an economic principle that states that the price and quantity of a good or service are determined by the interaction between buyers and sellers in a market. Specifically, the law states that the lower the price of a good or service, the higher the quantity demanded by buyers, and the lower the quantity supplied by sellers. Conversely, the higher the price, the lower the quantity demanded and the higher the quantity supplied. This relationship between price and quantity forms the basis for market equilibrium, where supply and demand are in balance.
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#2. What happens to the price of a stock when there is high demand and low supply?
a) The price increases
When there is high demand and low supply for a stock, the price of the stock tends to increase. This is because there are more buyers looking to purchase the stock than there are sellers willing to sell it, which creates a shortage of available shares. As a result, buyers may be willing to pay a higher price to secure the shares they want, while sellers may be able to demand a higher price due to the limited supply. This dynamic can lead to a price increase until supply and demand come back into balance.
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#3. What happens to the price of a stock when there is low demand and high supply?
b) The price decreases
When there is low demand and high supply for a stock, the price of the stock tends to decrease. This is because there are more sellers looking to sell the stock than there are buyers willing to purchase it, which creates a surplus of available shares. As a result, sellers may need to lower their asking price to entice buyers to purchase the stock, while buyers may be able to negotiate a lower price due to the abundant supply. This dynamic can lead to a price decrease until supply and demand come back into balance.
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#4. What is the relationship between the price of a stock and the quantity of shares traded?
b) Direct relationship
The relationship between the price of a stock and the quantity of shares traded is generally a direct relationship. As the price of a stock increases, the quantity of shares traded tends to increase as well. This is because investors may be willing to buy more shares at a higher price, particularly if they believe the stock will continue to rise. Conversely, as the price of a stock decreases, the quantity of shares traded tends to decrease, as investors may be less interested in purchasing shares at a lower price.
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#5. What is the difference between supply and quantity supplied in stock trading?
a) Supply refers to the total amount of a stock available, while quantity supplied refers to the amount of a stock available at a specific price
In stock trading, supply refers to the total amount of a particular stock available in the market, while quantity supplied refers to the amount of that stock that is available at a specific price. Supply takes into account all of the shares of a stock that are in existence, including those that are not currently available for sale. Quantity supplied, on the other hand, is a specific measure of how many shares are available at a given price point, and is affected by factors such as demand, market conditions, and individual seller behavior.
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#6. What happens to the supply of a stock when the price increases?
a) The supply increases
When the price of a stock increases, the supply of that stock tends to increase as well. This is because higher prices may encourage existing shareholders to sell their shares, and may also motivate companies to issue new shares of stock to take advantage of the increased demand. Additionally, higher prices may incentivize investors to purchase shares of the stock, which can increase the supply of shares available in the market. This dynamic can lead to an increase in the overall supply of the stock until supply and demand come back into balance.
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#7. What happens to the demand for a stock when the price decreases?
a) The demand increases
When the price of a stock decreases, the demand for that stock tends to increase. This is because lower prices may make the stock appear more attractive to investors, particularly if they believe that the stock is undervalued or likely to rebound. Additionally, lower prices may make it easier for investors to purchase shares of the stock, which can increase demand. This dynamic can lead to an increase in the overall demand for the stock until supply and demand come back into balance.
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#8. What is the equilibrium price in stock trading?
c) The price at which the quantity supplied is equal to the quantity demanded
In stock trading, the equilibrium price is the price at which the quantity supplied is equal to the quantity demanded. This means that the market for a particular stock is in a state of balance, with neither buyers nor sellers having an advantage in setting the price. At the equilibrium price, all shares of the stock available for purchase are bought and sold, and there is no excess supply or demand. The equilibrium price can change over time as market conditions and investor behavior shift.
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#9. What is the difference between demand and quantity demanded in stock trading?
a) Demand refers to the total amount of a stock that buyers want to purchase, while quantity demanded refers to the amount of a stock that buyers want to purchase at a specific price
In stock trading, demand refers to the total amount of a particular stock that buyers are willing to purchase at any given time, while quantity demanded refers to the amount of that stock that buyers are willing to purchase at a specific price. Demand takes into account all factors that affect a buyer’s willingness to purchase a stock, including market conditions, company performance, and investor sentiment. Quantity demanded, on the other hand, is a specific measure of how many shares buyers are willing to purchase at a particular price point, and is influenced by supply, market conditions, and individual buyer behavior.
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#10. What is the difference between a shift in supply and a movement along the supply curve in stock trading?
a) A shift in supply occurs due to changes in factors such as production costs or technology, while a movement along the supply curve occurs due to changes in price
In stock trading, a shift in supply occurs when the overall supply of a particular stock changes due to changes in factors such as production costs or technology. For example, if a company develops a new manufacturing process that lowers its costs, it may be able to increase the supply of its stock in the market. On the other hand, a movement along the supply curve occurs when the price of a stock changes, causing the quantity supplied to change in response. A movement along the supply curve does not involve any change in the overall supply of the stock.
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Here are a few tips to help you get the most out of taking a quiz on supply and demand in stock trading:
- Review the basics before you start the quiz. Make sure you have a solid understanding of the principles of supply and demand, as well as how they interact to determine the price of a stock.
- Read each question carefully. Take your time to make sure you fully understand what each question is asking before you choose your answer.
- Don’t be afraid to guess. If you’re not sure of the answer to a particular question, it’s better to make an educated guess than to leave it blank. You might be surprised at how much you know!
- Keep track of your score. Whether you’re taking the quiz for fun or as part of a larger learning experience, it’s a good idea to keep track of your score. This can help you identify areas where you need to focus your studying, and can give you a sense of accomplishment as you see your score improve over time.
- Use the quiz as a learning opportunity. Even if you get some answers wrong, don’t get discouraged. Use the quiz as an opportunity to learn more about supply and demand in stock trading, and to improve your understanding of these important concepts.
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