What Is An Ask Price?
Ask price is the value a seller places on goods, services, or securities. It is the price a seller is asking a buyer to pay to purchase an item.
The term “ask price” applies to almost every financial market, such as stocks, bonds, foreign exchange. In the stock market or financial market in general, it is impossible to talk about the “ask price” without referring to the “bid price” as they both work hand in hand. While the ask price refers to the lowest price an investor is willing to sell his shares, the bid price refers to the highest price an investor is willing to pay for a stock. Essentially, ask and bid price refers to the best price at which a share is bought and sold at a particular time.
Another term for ask price is the “offer price,” which means the price a seller demands for a commodity. Ask price does not apply to the financial market alone; it features perfectly in real estate too. In real estate, ask price refers to the amount of money the seller wants to sell a house to the buyer. Usually, the situation of things in the market, i.e., demand and supply, determines the ask price. For instance, when there is high demand for a house, sellers see it as an opportunity to increase their ask price to make more profit. On the other hand, sellers would decrease their ask price to lure buyers when demand is low.
Ask Price Example
Mike wants to purchase a new home in a highly sort after neighborhood. Due to the high influx of buyers to the area, home sellers raise their ask price and demand that buyers pay an exorbitant price. After a series of negotiations, Mike decides to purchase a home elsewhere since he could not get any seller whose asking price fell within his budget. However, some years later, there was an economic meltdown, and the number of people buying who wanted to purchase homes in that area reduced. That causes sellers to drastically reduce their ask price in a bid to entice new buyers.« Back to Glossary Index