An increased demand for stock ________ the price.

Question

BlackTom AI · Accepted Answer

Consider the statement: 'An increased demand for stock ________ the price.'

Option 1: increases. This aligns with basic economic principles. When demand rises, buyers are willing to pay more, which drives up the equilibrium price of the stock, assuming other factors remain constant. Conceptually, the demand curve shifts to the right, leading to a higher price point.

Option 2: decreases. This would be inconsistent with standard supply and demand analysis. If demand decreases, buyers are willing to pay less, typically causing the price to fall. This would reflect a leftward shift of the demand curve or a mismatch between quantity demanded and price that reduces price levels.

To distinguish the two, keep in mind that price moves in the direction of the demand change: more demand pushes prices up, whereas less demand pushes prices down. Misinterpreting this could stem from confusing demand with supply effects or assuming one-time changes without considering market equilibrium dynamics.

In summary, an increased demand for stock tends to raise its price, while a decrease in demand tends to lower the price, which makes the first option the correct choice and the second option incorrect.

BUSFIN 1200 AU2025 (2014) Final Exam- Requires Respondus LockDown Browser

An increased demand for stock ________ the price.

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