What is a market?
A market is just people buying and selling. Prices move because of how many people want something.
A market is people buying and selling
You have already been to a . A farmers market, a grocery store, a lemonade stand, an online shop: all markets.
Every market has two kinds of people:
- want to get something and pay money for it.
- have something and want money for it.
When a buyer and a seller agree on a , a sale happens.
Why prices go up and down
Picture an apple stand. The apples cost $2 each.
- One morning a lot of people want apples, but the stand only has a few left. Buyers start saying, "I'll pay $3!" The price goes up.
- Another day almost nobody wants apples, and the stand has a mountain of them. The seller says, "Fine, $1 each." The price goes down.
That's called . More people wanting something than there is of it pushes the price up. More of it than people want pushes the price down.
The stock market is the same thing
The stock market is a giant apple stand, but instead of apples, people buy and sell little pieces of companies called . It happens on computers, millions of times a day, all over the world.
Every time you see a price move on a chart, it's just buyers and sellers agreeing on a new price.
Remember
- A market is people buying and selling.
- A sale happens when a buyer and a seller agree on a price.
- More buyers than sellers: price goes up. More sellers than buyers: price goes down.
Check yourself
1. What two kinds of people does every market have?
2. Lots of people want apples, but there are only a few left. What happens to the price?
3. In the stock market, what are people buying and selling?
Next lesson: Bulls and bears
Money Tree School is education, not financial advice. Examples use made-up or historical numbers to show how things work; they are not recommendations to buy or sell anything. Markets can lose money.