Market Price

What is Market Price?

Market Price is the market value or worth of a good or service as determined by the forces of demand and supply. This is also referred to as equilibrium price or prevailing market price.

Market Price is required for the purposes of assessing the worth of a good or service on the market offer.

Market Price is necessary for there cannot be any exchange of goods and services is no common price-ie the market or equilibrium price.

How does Market Price  work?

Market Price works on the basis of the forces of demand and supply. Such that where the two forces are equal becomes the market value or price of the good in question.

Illustration

NOTES;

  • If the market value is equal to intrinsic value, we say that the market has efficiently priced the stock

              Example; market price of KLL Airway=$15 and the intrinsic value=$15

  • If the market price/value of stock is more than the intrinsic value, we say the market has overpriced stock or we say the stock is overpriced

              Example; market price of KLL Airway=$25> Intrinsic value=$15

 

  • If the market price/value of stock is less than the intrinsic value, we say the market has underpriced stock or we say the stock is overpriced

              Example; market price of KLL Airway=$15< Intrinsic value=$22