what is market price 
the market price is the current price at which a product or service can be bought or sold the market price of a product or service is determined by the forces of supply and demand the price at which quantity supplied equals quantity demanded is the market price the market price is used to calculate consumer and economic surplus economic surplus is the sum total of consumer surplus and producer surplus understanding market pricea shock to either the supply or the demand for a product or service can change the market price for a product or service a supply shock is an unexpected event that suddenly changes the supply of a good or service a demand shock is a sudden event that increases or decreases the demand for a good or service some examples of supply shock are interest rate cuts tax cuts government stimulus terrorist attacks natural disasters and stock market crashes some examples of demand shock include a steep rise in oil and gas prices or other commodities political turmoil natural disasters and breakthroughs in production technology in stock trading the market price is the most recent price at which a stock was traded stock market prices are the result of the interaction of traders investors and dealers for a trade to occur a buyer and a seller must agree on a price bids are represented by buyers and offers are represented by sellers the bid is the highest price someone is advertising they will buy at while the offer is the lowest price someone else is advertising they will sell at for a stock this may be 50 51 and 50 52 a buyer who no longer thinks that 50 52 is a good price may drop the bid to 50 25 the sellers may or may not agree a trade only occurs if a seller accepts the bid price or a buyer accepts the offer price bids and offers change constantly as buyers and sellers change their bids as sellers accepts bids the price drops and as buyers accept offers the price risess in the bond market the market price in the bond market is the last reported price excluding accrued interest this is called the clean price example of market priceassume that bank of america corp bac has a 30 bid and a 30 01 offer nine traders want to buy bac stock at the moment this represents the demand for bac stock five traders bid for 100 shares each at 30 three traders bid 29 99 and one trader bids 29 98 these orders are listed on the bid nine other traders want to sell bac stock at this moment this represents the supply of bac stock five traders sell 100 shares each at 30 01 three traders sell at 30 02 and one trader sells at 30 03 these orders are listed on offer say a new trader comes in and wants to buy 800 shares at the market price the market price in this case is all the prices and shares it will take to fill the order this trader has to buy at the offer 500 shares at 30 01 and 300 at 30 02 now the spread widens and the price is 30 by 30 03 because all the shares offered at 30 01 and 30 02 have been bought since 30 02 was the last traded price this is the market price other traders may take action to close the spread since there are more buyers the spread is closed by the bid adjusting upward the result is a new price of 30 02 by 30 03 this interaction is continually taking place in both directions and is continuously adjusting the price of the stock 