Final answer:
A market is in equilibrium if the amount producers want to sell is equal to the amount consumers want to buy, without any surplus or shortage.
Step-by-step explanation:
A market is in equilibrium when certain conditions are met. Specifically, it refers to a situation where the quantity of a product that producers are willing to supply at a certain price is equal to the quantity that consumers are willing to buy at that price.
This can be visually represented on a graph where the supply and demand curves intersect, indicating the equilibrium price and equilibrium quantity. At this point, there is no surplus or shortage in the market, as the amount available is just right to satisfy the demand.
For instance, consider a market for coffee, as described in the example. If the equilibrium price of coffee is $4, and at this price, the quantity of coffee that consumers wish to buy equals the amount that producers want to sell, say 200 million pounds, then the market for coffee is said to be in equilibrium.
In this state of balance, there is neither excess coffee unsold nor a shortage of it. If the price were any higher or lower, market forces would typically adjust it back towards the equilibrium.
Economic efficiency is achieved in this equilibrium state because all potential gains from trade have been realized and no additional benefits can be obtained by increasing or decreasing the quantity produced or consumed.
The concept of consumer surplus, producer surplus, and social surplus are also associated with market equilibrium, indicating the benefits that accrue to consumers and producers due to the price mechanism.