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. I've given you a limit order book to the right. Limit buys are the bids - people are willing to buy X shares at

. I've given you a limit order book to the right. Limit buys are the bids - people are willing to buy X shares at that price. Limit sell orders are the asks. People are willing to sell X shares at that price. Note that, accordingly, bids are less than asks.
So, how do trades ever happen if bids are less than asks? Don't people need to agree to a price? Let's walk through some trading and see what happens.
a. Suppose that a market order to buy 100 shares comes in. What happens?
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b. What would the price of the next buy order be? How about if the market order was for 600 shares?
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c. If you were a dealer, making a market in this stock, how would you respond to a sudden stream of buy orders coming in? Remember, the dealer is putting what they call "resting" limit orders in - prices they are willing to buy or sell at. They can change these, if they want to, just like any firm can change their prices.

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