How is equilibrium price determined in a market?

The equilibrium price in a market is established when the quantity supplied by producers exactly matches the quantity demanded by consumers. At this price point, the market is considered to be in balance, and there is no tendency for the price to change, assuming other factors remain constant.

When the market is at equilibrium, the amount that consumers wish to purchase is equal to the amount that producers wish to sell. This is a fundamental concept in economics, as it helps illustrate the dynamics of supply and demand. If the price is set above the equilibrium, a surplus occurs; if it is below, a shortage occurs. Therefore, the equilibrium price reflects the most efficient allocation of resources in a free market economy.