What determines the demand for a stock?

Demand for a stock is determined by how valuable the stock is. Value is determined by both numerical and perceived figures. Demand for a stock increases as supply for that stock decreases. Demand for the stock is not as high if there are enough stocks in supply to meet the demand. To understand what determines the demand for stock you must understand the following:

Factors that Influence the Market (and therefore the demand for stock)
Change is what changes the value of stocks in the market. With changing value comes a change in demand.
Economic Changes - As will be illustrated by the following examples, tangible financial increases determine demand for stock. When a company is making money or producing a highly desirable product, demand for their stock increases.

Social/Psychological Changes - Even if there aren't necessarily tangible results from a company, perceived improvement and value increase demand for stock. If a group of investors, through whatever means, believe that certain shares will give big returns, the market will take note and the demand will increase. There does not always have to be a monetary reason.

The Relationship Between Supply and Demand
When Demand is HIGH - Demand is high for stock when investors perceive that its worth is high. Investors buy this high-demand stock, which then reduces its supply. When the supply for a stock cannot meet with the demand for stock, the price of stock goes up. When the stock is being sold for a high price its value is perceived as high, and the cycle continues.
EXAMPLE: Company A has just had a record year in sales. They met and exceeded all of their financial goals for the year and anticipate twice as many earnings for next year. Investors see buying stock with Company A as a safe a lucrative investment. They are confident that due to past performance and strong management, that Company A will continue to excel. So, the demand for stock increases. Those who currently own stock in Company A are glad that they chose to invest with them because they can now see that they will probably be handsomely rewarded. These current investors are aware of the projected continual improvements of Company A and are not willing to sell their shares. This decreases supply. Because people want to buy Company A stock, but no one is willing to sell Company A stock, the demand is high, the supply is low and the price investors are willing to pay to get their hands on Company A stock goes up. Again this cycle continues until current investors are persuaded by high selling prices to sell (after all the whole idea is to make money). Eventually demand levels out again.

When Demand is LOW - Demand is low for stock that does not have a lot of perceived value attached to it. Investors are less likely to buy shares that do not guarantee a return. When the risk for loosing an investment is high with a particular stock, demand for that stock is low. When demand is low, investors who currently own that stock are looking to sell it and hopefully loose as little as possible. This creates an increase in supply.
EXAMPLE: Company B just had its CEO and CFO arrested for embezzlement. The perception of the company is that it will be in ruin before the end of the year. Investors are afraid that they chose poorly when they invested in Company B and now want to sell their shares before they are no longer worth the paper their written on. This makes the supply for Company B stock increase. No one is interested in investing with Company B because everyone believes that they are a lost cause. Demand is low when few people want to buy. When demand is low, current shareholders become more and more desperate to sell. This makes the price of stock decrease. Eventually, those investors who are willing to take some risks with their investments buy up Company B stock (if they aren't already dissolved) in the hopes that things will turn around for this company, that they will hire a new CEO and CFO and that they will have made a smart move by investing while demand was low.