The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock.Figure 17.2

-A bubble or panic generally occurs in the stock market because of:

Question

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock.Figure 17.2
 
-A bubble or panic generally occurs in the stock market because of:

Quizplus · Accepted Answer

Bubbles or panics occur due to irrational exuberance or abnormal valuations, where the market prices of securities rise above their fundamental values. This can happen when investors make speculative purchases based on expectations of future price increases or when there is herd behavior in the market. Government policies, business cycle swings, and increased profitability of firms may affect the stock market but do not necessarily lead to bubbles or panics. Deliberate government actions to control inflation may have an impact on the market but are not a primary cause of bubbles or panics.

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