Market equilibrium happens when the amount of a product that people want to buy is equal to the amount that sellers want to sell. Price changes are really important for making this balance happen.

1. Surplus and Shortage:

   • A surplus is when there are more goods than people want to buy. For instance, if a product is priced at $100 and sellers have 200 units available, but customers only want 150 units, there’s a surplus of 50 units.
   • A shortage is when more people want a product than what is available. If a product costs $50 and buyers want 200 units, but sellers only have 150 units, there’s a shortage of 50 units.

2. Price Signals:

   • When prices go up, it tells producers to make more products and can get new sellers to join the market.
   • When prices go down, it signals producers to make less, because making too much could lead to losing money.

By making these changes, the market works its way toward equilibrium, which helps supply and demand balance out nicely.