Q1. When share prices move upwards on the stock market, people will tend to start buying
them. When share prices move downwards, people often choose to sell them. Illustrate
and explain these two ideas using appropriate demand and supply diagrams.
In this essay, I will show how share price fluctuation affects the supply and demand diagrams.
Furthermore, I will explain the ideology behind this and how it occurs by using labelled and
structured diagrams.
When it comes to share prices, it is easy to understand the whole concept of the prices moving
upwards and downwards. That is based on the supply and demand of certain share, the more people
that want to buy the share will mean greater the demand for it and on the other hand more people
selling their shares means the supply is supply is increasing. Ceteris paribus, assumption is defining
that the higher share prices is usually associated with the lower demand for them. This reflects
similarly on lower share prices as they are associated with greater demand, and therefore they move
upwards or downwards depending on their demand. (Chris Mulhearn, 2016).
Various factors determine the demand and supply of share prices, for example, expectations of
future market changes will massively influence the demand of a share. Once a share reaches a
certain price it is impossible to determine if the price will keep on rising or if it will move downwards.
Consumer surplus is what the consumer is paying for the given product, in this case shares, and the
difference between what they would be willing to pay for it. (LECTURE 2 DEMAND AND SUPPLY, 2017). It
factors into the movement of shares as some people think that it is not worth buying them at certain
price and they wait for the share to move downwards to a certain price that they would be satisfied.
The reason for shares being bought when they
move upwards is that people wish to make
profit from them rather than loss. As they
move upwards from their initial price this will
P2
P1
Price
mean that people buying them at lower prices will
be making profit later on. As more people start
D1
D2
to buy them, demand for shares also
Figure 1.0
Q1
increases and this can be seen in Figure 1.0.
Demand increases and therefore prices also
Q2
increase, as more people want it therefore the
Quantity
S
mark-up price has to be increased.
1
Name: Natan Trolka – Student ID: 793077
, Relevant example could Figure 3.0
be Ryanair shares market,
as they have experienced
increase and decrease
over the past year. There
are many factors affecting
the price drop in shares.
Figure 3.0 (Lansdown,
2017) shows share prices
for the whole year.
Referring to my example, in March as the share prices started to escalate Brexit talks also started
happening and this could have caused the share prices to go up. Many people weren’t sure of what
will happen to the aviation industry and what this would mean for Ryanair, company that has major
low-fare fights to and out of UK. Uncertainty towards UK market may increase the share prices as
Ryanair would start focusing on different locations that would be much more beneficial for the
company. (Lisa O'Carroll, 2017)
Share price decrease started occurring around September as Ryanair announced that they will be
cancelling flight to most countries in EU. They have announced to cancel around 400.000 bookings.
(Morris, 2017) This began frustrating their customers as they were asking for refunds. Therefore, this
could’ve cause share price drop as it reflected negative public image on the company.
As share prices begin to move downwards, Figure 2.0
more shareholders will start to sell their shares Price
D S1
in order not to lose any profits made from S2
buying them previously. Now there will be
more supply of shares as price is not attracting P1
many consumers into buying them. In Figure P2
2.0, we can see that the supply line is shifting
to the right, which means it is increasing along
with the price decrease this will result in Quantity
Q1 Q2
quantity increasing.
When shares are being bought it is usually the best for the buyer to buy them at the lowest price
and sell them at the highest price. Many factors are influencing price change. Demographics are also
a key factor as some countries are less interested in certain shares, furthermore the exchange
2
Name: Natan Trolka – Student ID: 793077
them. When share prices move downwards, people often choose to sell them. Illustrate
and explain these two ideas using appropriate demand and supply diagrams.
In this essay, I will show how share price fluctuation affects the supply and demand diagrams.
Furthermore, I will explain the ideology behind this and how it occurs by using labelled and
structured diagrams.
When it comes to share prices, it is easy to understand the whole concept of the prices moving
upwards and downwards. That is based on the supply and demand of certain share, the more people
that want to buy the share will mean greater the demand for it and on the other hand more people
selling their shares means the supply is supply is increasing. Ceteris paribus, assumption is defining
that the higher share prices is usually associated with the lower demand for them. This reflects
similarly on lower share prices as they are associated with greater demand, and therefore they move
upwards or downwards depending on their demand. (Chris Mulhearn, 2016).
Various factors determine the demand and supply of share prices, for example, expectations of
future market changes will massively influence the demand of a share. Once a share reaches a
certain price it is impossible to determine if the price will keep on rising or if it will move downwards.
Consumer surplus is what the consumer is paying for the given product, in this case shares, and the
difference between what they would be willing to pay for it. (LECTURE 2 DEMAND AND SUPPLY, 2017). It
factors into the movement of shares as some people think that it is not worth buying them at certain
price and they wait for the share to move downwards to a certain price that they would be satisfied.
The reason for shares being bought when they
move upwards is that people wish to make
profit from them rather than loss. As they
move upwards from their initial price this will
P2
P1
Price
mean that people buying them at lower prices will
be making profit later on. As more people start
D1
D2
to buy them, demand for shares also
Figure 1.0
Q1
increases and this can be seen in Figure 1.0.
Demand increases and therefore prices also
Q2
increase, as more people want it therefore the
Quantity
S
mark-up price has to be increased.
1
Name: Natan Trolka – Student ID: 793077
, Relevant example could Figure 3.0
be Ryanair shares market,
as they have experienced
increase and decrease
over the past year. There
are many factors affecting
the price drop in shares.
Figure 3.0 (Lansdown,
2017) shows share prices
for the whole year.
Referring to my example, in March as the share prices started to escalate Brexit talks also started
happening and this could have caused the share prices to go up. Many people weren’t sure of what
will happen to the aviation industry and what this would mean for Ryanair, company that has major
low-fare fights to and out of UK. Uncertainty towards UK market may increase the share prices as
Ryanair would start focusing on different locations that would be much more beneficial for the
company. (Lisa O'Carroll, 2017)
Share price decrease started occurring around September as Ryanair announced that they will be
cancelling flight to most countries in EU. They have announced to cancel around 400.000 bookings.
(Morris, 2017) This began frustrating their customers as they were asking for refunds. Therefore, this
could’ve cause share price drop as it reflected negative public image on the company.
As share prices begin to move downwards, Figure 2.0
more shareholders will start to sell their shares Price
D S1
in order not to lose any profits made from S2
buying them previously. Now there will be
more supply of shares as price is not attracting P1
many consumers into buying them. In Figure P2
2.0, we can see that the supply line is shifting
to the right, which means it is increasing along
with the price decrease this will result in Quantity
Q1 Q2
quantity increasing.
When shares are being bought it is usually the best for the buyer to buy them at the lowest price
and sell them at the highest price. Many factors are influencing price change. Demographics are also
a key factor as some countries are less interested in certain shares, furthermore the exchange
2
Name: Natan Trolka – Student ID: 793077
