What is equilibrium in a market?

Equilibrium in a market refers to the point where the quantity of a good or service that consumers are willing to purchase equals the quantity that producers are willing to sell. This balance ensures that the market clears, meaning there are no surpluses or shortages of the product. When the quantity demanded matches the quantity supplied, it creates a stable market condition where the price remains constant unless disrupted by external factors such as changes in consumer preferences or production costs.

This concept is fundamental in economics as it illustrates how markets function under the forces of supply and demand. When demand increases, for instance, the equilibrium price may rise, prompting producers to increase supply. Conversely, if demand decreases, the price may fall until a new equilibrium is reached. Understanding this balance helps in analyzing various market scenarios and in predicting how changes in supply or demand will affect prices and availability.