: Who are the buyers and sellers that determine the bid and ask price? It's commonly explained that the price of a stock is determined by supply and demand. You can see the bid price (highest price a buyer is willing to pay

I figure that the buyers and sellers cannot be regular people with stocks as they always buys at the bid price and sell at the ask price, so I'm a little confused as to who these buyers and sellers are?

This is incorrect. Buying at the ask price and selling at the bid price (you got them mixed around) is called a market order, but it is not the only way for a normal person to place orders. You can also place a limit order where you specify the price you are willing to sell/buy at, and wait for someone to accept that price. Your limit order will stand for a set period of time until it is accepted, and if time runs out the order will be cancelled.

The bid and ask prices are set by people who have placed limit orders and are waiting for them to be filled.

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The other answers here do a great job of answering the question, but I'll throw in a visual example of a market. The Steam Community Marketplace behaves similarly to the major financial markets, albeit on a much smaller scale that makes it easier to understand. You can go to any item and watch it update in realtime to see a market in action.

Each item on the market can be compared to an individual stock. They each have their own price that's determined by the current buy and sell orders. This screenshot shows the current buy/sell prices for this item, as well as the five next best prices. (The big green buttons are for the user to buy or sell, which is why they may seem backwards.) There's a graph further down the page which shows the volumes for the full spread.

Also on the page is a rolling activity feed. Here, you can see the individual people involved in creating buy and sell orders and making actual purchases. In this image, you can see both buy and sell orders being placed (limit orders) as well as someone buying at the current selling price (market order)

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My question is, who are these buyers and sellers and furthermore, how are the prices determined as a function of these buyers and sellers? How is the supply and demand measured/used?

Who are these people? Buyers are people who want to buy the stock. Sellers are people who want to sell the stock. It's that simple.

Market prices are determined by the prices people choose for their limit orders.

Supply and demand is depicted by the market size that is part of NBBO quote. For example, if the quote is:

.00 x .15 with a size of 9 x 5 (where size represents round lots)

then the total volume of buy order(s) at the bid is 900 shares and 500 shares are being offered at the ask.

I figure that the buyers and sellers cannot be regular people with stocks as they always buy at the ask price and sell at the bid price so I'm a little confused as to who these buyers and sellers are.

Your assumption is incorrect. Anyone who wants the position right now at current price places a market order. Anyone who wants price improvement places a limit order.

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In most cases, people do not place orders stating "I want to buy X at any price" or "I want to sell X at any price".

Instead, they place limit orders stating "I want to buy X for up to price Y", or "I want to sell X for at least price Y".

If the order matches a current opposite order, then it's fulfilled immediately. Otherwise, it gets added to the order book.

The order book is simply a list of current unfulfilled buy and sell orders. Something like:

Buy

30 @ 20.00
50 @ 19.90
10 @ 19.80
70 @ 19.50

Sell

10 @ 21.00
40 @ 21.20
20 @ 21.50
90 @ 22.00

As you can see, someone wants to sell 10 shares at each. But the highest buying price is . So those orders remain on the order book until something changes.

The bid and ask prices you see are the "best" on each side ( and in this example).

If nothing changes, then no sale happens. But at some point, someone will make a change. They may need to sell the stock urgently because they need the cash and are willing to get less money to sell right away. Or they want to sell the stock even at a "discount" because they think it's no longer worth its price and want to sell it before it goes down even further. Then they may place a sell order with a limit of , and then that sale gets fulfilled, and the latest trade (the "stock price" usually reported) is now .

Likewise, you may have someone who really wants to buy that stock because they think it's worth a lot more. So they may place a buy order with a limit of , and that gets fulfilled. The latest trade (again, the "stock price") would then become .

Here you can see a graphical representation of an order book varying over time:

Source: By Kjerish - Own work, CC BY-SA 4.0

Buy orders are in green, sell orders are in red.

So:

My question is, who are these buyers and sellers

Anyone. Small private shareholders, very large pension funds, anything in between.

how are the prices determined as a function of these buyers and sellers?

Each buyer and seller determines the price they are wiling to buy or sell at based on whatever their own criteria are. If they don't match existing opposite orders, they go into the order book. If they match, a sale is made, and that becomes the new "stock price".

How is the supply and demand measured/used?

The size, shape and position of the order books.

I figure that the buyers and sellers cannot be regular people with stocks as they always buy at the ask price and sell at the bid price

For the sale to happen, yes, there needs to be a match, so technically, they do indeed "buy at the ask price and sell at the bid price". But anyone can place a limit order that will be at a price different from the current bid or ask price, and wait for it to be fulfilled (or not). In that case, there won't be a trade right away (or ever, if the prices are too far off).

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The NBBO

The price reflects how willing a market participant is to buy or sell at a given price.

Imagine you have a stock (let's say IBM):

If you had buyer A (Alice) who wanted to buy IBM at 0 she would send a limit order to the exchange to buy at 0.
If you had a seller B (Bob) who wanted to sell IBM at 0, he would send a limit order to the exchange to sell at 0.
There could be another buyer C (Charles) who wanted to buy IBM at 0, he would send a limit order to the exchange to buy at 0.

This process continues through many different market participants until the exchange comes up with the best bid or offer (the BBO).

At the time of the close, the best bid was 8.82 and the best offer was 9.50

Many market data services consolidate the prices from each exchange to come up with the National Best Bid or Offer or NBBO.

Supply and Demand

If there are more people willing to buy the stock, they will increase the price they would buy at, or submit a market order, an order to buy at any price (not recommended IMHO), which would cause the price to go up.

Market Makers and Specialists

While prices can be determined by individual or institutional investors, the problem is that most people don't spend their whole day sending orders to buy and sell all the time. So to encourage this, the exchange has a special type of member called a "specialist" or "market maker" who is obliged to provide continuous quotations in a security. They usually get more favorable rates from the exchange and better margin rates, but have to provide quotes to buy and sell the security all day long. An analogy is like a pawn broker who is willing to buy and sell gold, or a money changer that is willing to buy and sell foreign currency at a given price.

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