For H2 and H1 Economics students and others to practise,
Application of Demand and Supply Theory to Share Trading.
In the stock market, when share buyers want to buy the share of a company eg SPH, they can join the buy queue eg they want to buy 100,000 shares at $3.70 and when the share sellers want to sell the share of a company eg SPH, they can join the sell queue eg they want to sell 200,000 shares at $3.71.
Buy Queue Buy Price Sell Queue Sell Price
100,000 $3.70 200000 $3.71
Questions
(a) If the buy queue is decreasing, what does this mean ?
This means that sellers are selling the SPH share to the buyers at $3.70
If the buy queue becomes zero, will the SPH price rise or fall ?
When the buy queue becomes zero, there are no more buyers who
want to buy the SPH share at $3.70, the sellers will have to sell
the share at a lower price ie $3.69
(b) If the sell queue is decreasing, what does this mean ?
This means that buyers are buying the SPH share from the sellers at $3.71
If the sell queue becomes zero, will the SPH price rise or fall ?
When the sell queue becomes zero, there are no more sellers who
want to sell the SPH share at $3.71, the buyers will have to buy
the share at a higher price ie $3.72
(c) Discuss the possible factors that can lead to the increase and decrease in
the buy queue ?
(d) Discuss the possible factors that can lead to the increase and decrease in
the sell queue ?
(e) If an investor has monopolistic power ie the investor owns a large amount of
SPH shares, how could the investor manipulate the share price of SPH and
profit from it ?
Thank you for your kind attention
Regards,
ahm97sic