When does a market achieve equilibrium?

A market achieves equilibrium when the forces of supply and demand are in balance. In this state, the quantity of goods and services that consumers are willing to buy at a given price matches the quantity that producers are willing to sell. This balance results in a stable market price, where no inherent pressures exist to either increase or decrease that price.

When supply equals demand, both consumers and producers are satisfied; resources are efficiently allocated to their most valued uses, and there is no surplus or shortage. This concept is foundational in economics, highlighting how price adjustments work to bring supply and demand into alignment.

In contrast, other options do not accurately represent market equilibrium. Setting prices based on consumer income does not inherently ensure a balance between supply and demand. An environment where demand exceeds supply significantly leads to shortages and price increases rather than equilibrium. Similarly, if producers have excess inventory, it indicates that supply surpasses demand, which disrupts market equilibrium rather than achieving it. Therefore, the correct identification of equilibrium lies in the balance of supply and demand.