What does market equilibrium signify in economics?

Market equilibrium in economics refers to the condition where the quantity of goods or services supplied equals the quantity of goods or services demanded at a given price. This balance is crucial because it determines the market price and the quantity of goods sold. When the market is in equilibrium, there are no inherent forces pushing the price to change, which means that both consumers and producers are satisfied with the price at which they can buy or sell the product.

At this equilibrium point, the interests of buyers and sellers align perfectly; sellers are able to sell all they want at the market price, and buyers can purchase all they want without excess demand or supply. If the market were not at equilibrium, it would lead to either a surplus (when supply exceeds demand) or a shortage (when demand exceeds supply), prompting changes in price as the market adjusts back towards equilibrium. This dynamic interaction is a core principle in economic theory and helps in understanding how markets operate effectively.