What is described as the situation when market demand equals market supply?

Market equilibrium occurs when the quantity of a good or service that consumers are willing to buy (market demand) is equal to the quantity that producers are willing to sell (market supply). This balance signals that the market is functioning efficiently, as there is neither a surplus nor a shortage of the product. At this point, the price of the good or service remains stable, unless influenced by external factors. Market equilibrium is a key concept in economics, indicating a state of balance where the forces of supply and demand meet.

In contrast, surplus refers to a situation where the quantity supplied exceeds the quantity demanded, often leading to excess inventory and downward pressure on prices. A shortage occurs when demand exceeds supply, causing consumers to compete for the limited goods available, typically resulting in higher prices. Market failure describes a scenario where the allocation of goods and services is not efficient, often due to externalities, public goods, or information asymmetries. Understanding market equilibrium is essential to grasp how markets operate under ideal conditions.