How the sharemarket works

Lesson 2 - Week 2

Accounting

YEAR 10

Feb 2015

GKR

Demand and Supply –what are the basics?

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Today’s Learning Intention:

Explore market forces and the secondary sharemarket.

Success Criteria: Able to explain –

• demand and supply

• the purpose of the secondary market

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Key Vocabulary:

• demand

• supply

• equilibrium

• complementary

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Market Forces

• Demand – how many people want to buy something and how much they are prepared to play.

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Market Forces

• Supply – how many people want to buy something and how much they are willing to pay for it.

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Activity – Buying Jeans

• You are going to buy jeans. What things are you going to consider?

• Write down 4 things you will consider when buying jeans.

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Activity Solution – Buying Jeans

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Activity – Supplying Jeans

• What things is the supplier of the jeans going to consider?

• Write down 6 things you think the supplier will consider when making and supplying the jeans.

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Activity Solution – Supplying Jeans

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Secondary Market

• As soon as a company issues shares as part of its float, those shares can be traded on the Secondary Market at the ASX.

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How The Sharemarket Works

• Buyers and sellers in the sharemarket exchange shares for a particular price. When both buyer and seller agree on a price per share a trade takes place.

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How The Sharemarket Works

• Table 1: Company XYZ

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How The Sharemarket Works

• The price of shares on the secondary sharemarket is determined by demand and supply just like other markets. When the demand for a stock is greater than the number of shares available at a particular price, the price of the stock increases. When there is no demand for a stock at a particular price, the price falls.

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Equilibrium Point

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Demand and Supply Game

• Play the Demand and Supply Game at http://www.shmoop.com/supply-demand/game.html

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Handout 1 – Market Forces

• Complete the Market Forces Handout

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Review:

1. Explain the purpose of the secondary market.

2. What two major factors influence the price of a share.

3. Describe a learning strategy you used today.

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