Final answer:
The equilibrium price is the market clearing price where quantity demanded equals quantity supplied, resulting in no surplus or shortage.
Step-by-step explanation:
The equilibrium price is the price at which the quantity demanded by consumers is equal to the quantity supplied by producers. This balance ensures that there is no shortage or surplus in the market. A surplus occurs when the quantity supplied exceeds the quantity demanded at an existing price, leading to excess supply. Conversely, a shortage happens when the quantity demanded exceeds the quantity supplied, creating excess demand. The equilibrium price is also known as the market clearing price because it is the point where supply and demand intersect and the market is 'cleared' of all goods, leaving no surplus or shortage.