The demand curve for stocks shows that:
A) at lower prices, less stock will be purchased.
B) at lower prices, more people calculate that the expected value of the firm's future earnings justify the stock's purchase.
C) at lower prices, more stock will be offered on the market.
D) A and B are true.

Question

Quizplus · Accepted Answer

The demand curve for stocks represents the relationship between the price of a stock and the quantity of stock that investors are willing to purchase. According to the law of demand, as price increases, quantity demanded decreases, and as price decreases, quantity demanded increases. Therefore, at lower prices, more people will calculate that the expected value of the firm's future earnings justify the stock's purchase. This is reflected in a rightward shift of the demand curve. Option A is partially true, but it does not reflect the entire picture as price is not the only factor that affects the quantity of stock purchased. Option C is incorrect as the quantity of stock offered on the market is represented by the supply curve. Option D is partially true but is not completely accurate as option A is only partially true.

The Demand Curve for Stocks Shows That