Explain How a Well-Functioning Stock Market Contributes to the Efficiency

question 100

Essay

Explain how a well-functioning stock market contributes to the efficiency of the economy.

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Definitions:

Consumer Surplus

A mismatch between the price consumers feel prepared to pay for a good or service, and the actual outlay.

Competitive Price

A price that is in line with or slightly below the market average, aiming to attract customers in a competitive environment.

Total Surplus

is the sum of consumer surplus and producer surplus, representing the overall economic benefit to society from trade or market activity.

Consumer Surplus

The split between the sum consumers would ideally pay for a good or service and the sum they actually end up paying.