What happens when a market is in equilibrium?

When a market is in equilibrium, it signifies that the quantity of a good or service that consumers are willing to purchase matches exactly with the quantity that producers are willing to sell at a certain price. At this point, there is no inherent pressure either to increase the price or to decrease it, as the forces of supply and demand are balanced.

In more detail, this balance indicates that at the equilibrium price, the market clears, meaning that all goods supplied are sold, and there are no shortages or surpluses. This is a fundamental concept in microeconomics, as it describes a stable state in the market where resources are allocated efficiently, and there is no excess supply or demand that would disrupt this balance. If supply or demand were to shift, the market would move away from equilibrium until a new equilibrium price is established.

The other choices presented represent scenarios where the market is not in equilibrium: when supply exceeds demand, there is a surplus, and when demand exceeds supply, there is a shortage. Therefore, they do not capture the essential characteristic of equilibrium, which is the balance between supply and demand. The choice that suggests prices are fixed and do not change also misrepresents equilibrium, as market dynamics typically affect prices over time even when