Location: PHPKode > projects > Uniform Price Markets > UPmarkets-0.1.0/help_pricing_rule.html
<H1>Price determination rule</H1><br>
The pricing rule for the market is extremely simple to state: <b>The price is calculated to equate total quantity participants are willing to buy with the total quantity participants are willing to sell.</b>  

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This rule can be thought of in terms of supply and demand.  <P>

The blue curve gives "demand" - it shows the total quantity that participants are willing to buy as a function of price. The lower the price, the more
buy quotes are triggered.
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The red curve gives "supply" - it shows the total quantity that participants are willing to sell as a function of price. The higher the price, the more
sell quotes are triggered.
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The curves look like steps because the quotes involve steps. If you say you are willing to buy 10,000 at 76, then you add a step to the demand curve of width 10,000 at price = 76. Above 76, you do not buy any - below or equal to 76, you buy 10,000.  Adding up everyone's quotes gives a series of such steps.
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When the market manager logs in with the "run market model" button above, a 
trading price is determined from the intersection between the red (supply) 
and blue (demand) curves on the graph. The curves are determined from 
the quotes that exist at that time.  Every quote that lies to the left of 
the intersection in the supply/demand graph trades, at the price determined 
by the intersection.
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