Which term describes the balancing of supply and demand to determine a fair market price?

The term that describes the balancing of supply and demand to determine a fair market price is market equilibrium. This concept refers to the point where the quantity of a good or service that consumers are willing to purchase at a given price equals the quantity that producers are willing to sell. At market equilibrium, there is no surplus or shortage of goods in the market, and the price tends to stabilize, reflecting the true value of the good based on consumer preferences and production costs.

In a competitive market, changes in supply and demand can shift the equilibrium point, leading to new market prices until a new balance is achieved. This dynamic nature is essential for understanding how markets function and how prices are set in the economy. Recognizing market equilibrium is critical for businesses and policymakers as it helps in making informed decisions regarding production, inventory management, and pricing strategies.