A market is in equilibrium when?

Step 1: Analyze the question The question asks for the condition that defines market equilibrium. Equilibrium means a state of balance where there is no tendency for price or quantity to change.

Step 2: Explain the concept In a market, two forces interact:

• Demand is the quantity buyers are willing and able to purchase at each price.
• Supply is the quantity sellers are willing and able to offer at each price.

The equilibrium price (market-clearing price) is the price at which quantity demanded equals quantity supplied. The quantity traded at that price is the equilibrium quantity.

• If price is above equilibrium, supply exceeds demand (a surplus), so price falls.
• If price is below equilibrium, demand exceeds supply (a shortage), so price rises.
• At equilibrium, there is neither surplus nor shortage, so the market is stable.

Step 3: Evaluate the options

• A. No government intervention: Markets can be in equilibrium even with government involvement (e.g., after a tax or subsidy is set). Absence of intervention is not the definition.
• B. Demand is the same as supply: This is the definition of equilibrium: quantity demanded = quantity supplied. ✔
• C. Buyers and sellers are free to sell more goods: This is vague and does not describe a balance of forces.
• D. No free entry and exit: This relates to market structure (e.g., monopoly), not to equilibrium.

Step 4: Answer

Step 5: Exam tip Remember the phrase "Qd = Qs". Whenever you see equilibrium in an Economics question, think of the point where the demand and supply curves intersect. Options that talk about government, entry, or exit are usually distractors that describe other concepts.