The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 16.2
-According to Figure 16.2,what sort of change in the market environment would increase the supply of stocks from S to S'and decrease the demand from D to D'?

Question

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 16.2

-According to Figure 16.2,what sort of change in the market environment would increase the supply of stocks from S to S'and decrease the demand from D to D'?

Quizplus · Accepted Answer

If news reveals that the economy is likely to go into a recession soon, investors will expect lower profits from firms and will be less willing to buy stocks. This will decrease the demand for stocks from D to D', while at the same time firms will expect lower sales and profits, leading them to decrease their production and supply of stock from S to S'.

The Figure Given Below Shows the Demand [D and D']