What is market equilibrium?

Market equilibrium occurs when the quantity demanded by consumers exactly matches the quantity supplied by producers at a particular price level. This balance ensures that there is neither a surplus nor a shortage of goods in the market. At this point, the market is at rest, and there is no inherent pressure for the price to rise or fall, as buyers can acquire the goods they desire without impediment, and sellers can sell all that they have produced.

When the quantity demanded is equal to the quantity supplied, it indicates that the preferences of consumers and the production capabilities of suppliers are aligned, leading to an efficient distribution of resources. Any deviation from this equilibrium, where demand exceeds supply or vice versa, sends signals to the market to adjust either prices or production levels to restore balance.