Final answer:
Equilibrium is the point of balance where the quantity demanded equals the quantity supplied in a market. It is represented graphically as the point where supply and demand meet and is known as the market clearing price. Equilibrium price influences the choices of buyers and sellers, and when equilibrium is reached, the quantity demanded is equal to the quantity supplied.
Step-by-step explanation:
Equilibrium is the point of balance at which the quantity demanded is equal to the quantity supplied. To see equilibrium graphically, it is the location where supply and demand meet. This location is also referred to as the market clearing price. The market clearing price is the exact place where demand of consumers is perfectly proportioned to the supply of producers. There are no products left over, nor is there a surplus. Likewise, there is no shortage; everyone who desired and was able to pay for a product was able to buy one.
Equilibrium price will influence the choices of both buyers and sellers. When equilibrium is reached, the quantity demanded is equal to the quantity supplied. For example in the graph of the coffee market below, at the equilibrium price of $4 consumers will purchase 200 million pounds of coffee, the same quantity that producers are willing to supply.
The word "equilibrium” means "balance." If a market is at its equilibrium price and quantity, then it has no reason to move away from that point. However, if a market is not at equilibrium, then economic pressures arise to move the market toward the equilibrium price and the equilibrium quantity.