ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The term “bid” refers to the highest price a buyer will pay to buy a specified number of shares of a stock at any given time. The term “ask” refers to the lowest price at which a seller will sell the stock. The bid price will almost always be lower than the ask or “offer, ” price.

Detailed explanation-2: -An auction market also known as a double auction market, allows buyers and sellers to submit prices they deem acceptable to a list. When a match between a buyer’s price and a seller’s asking price is found, the trade proceeds at that price. Trades without matches will not be executed.

Detailed explanation-3: -The New York Stock Exchange (NYSE) is an example of an auction market. Trades on the exchange will be executed when an offer and bid is matched – think of it as an agreed-upon price between the buyer and seller. While negotiations are made in OTC markets, no negotiations are made in auction markets.

Detailed explanation-4: -Over-the-counter markets do not have physical locations; instead, trading is conducted electronically. This is very different from an auction market system. In an OTC market, dealers act as market-makers by quoting prices at which they will buy and sell a security, currency, or other financial products.