Imagine you and your friends are playing a game where everyone has some candy. If one person starts panicking and throws away their candy, others might start panicking too and do the same. Soon, there's not much candy left for anyone, that's like a stock market crash.
Stocks are like pieces of candy in this game. When people think things will get worse, they sell their stocks fast, which makes the price drop quickly.
Examples
- A group of kids all decide to trade their toys, but when one kid decides not to play anymore, the others get scared and leave too.
- If everyone in your class suddenly drops out of the school play, you might feel like dropping out too, even if it's not that bad.
- Imagine a bakery where customers start walking out because they think the bread will be worse tomorrow. Soon, no one is buying bread anymore.
See also
- Why Do Prices Go Up So Much When There's a Shortage?
- Why Do We Use Money Instead of Bartering?
- Why Do We Have Different Kinds of Coins?
- Why Do We Have Different Kinds of Taxes?
- Why Do Prices Change So Much?
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Categories: Economics · stock market· crash· economics · Text is available under the Creative Commons Attribution-ShareAlike License.