Describe the types of information that market prices provide

Describe the types of information that market prices provide.

Solution

DEFINITION of \'Market Price\'

1. General: Unique price at which buyers and sellers agree to trade in an open market at a particular time. In formal markets (such stock exchanges) there are two market prices: the offer (selling) price which is higher, and bid (buying) price that is lower. The difference between these two prices is called margin or spread.

2. Accounting: Transfer price of a good or service (traded between a subsidiary and its parent) at which the profit of the whole enterprise will be maximized.

3. Bond market: Last reported price exclusive of accrued interest, also called clean price.

4. Securities trading, Current market price as indicated by the latest recorded trade. See also market value.

The current price at which an asset or service can be bought or sold. Economic theory contends that the market price converges at a point where the forces of supply and demand meet. Shocks to either the supply side and/or demand side can cause the market price for a good or service to be re-evaluated.

In economics market price is the economic price for which a good or service   is offered in the marketplace. It is of interest mainly in the study of microeconomics .Market Value   and market price is equal only under conditions of market efficiency, equilibrium and rational expectations.