What does equilibrium refer to in economics?

Equilibrium in economics refers to a state where the quantity supplied of a good or service is equal to the quantity demanded. This balance ensures that there is no surplus or shortage in the market. At this point, the price of the good is stable, as producers are selling exactly what consumers are willing to buy at that price. The market "clears" because all goods produced are sold, and consumers can obtain the quantity they desire without any unmet demand.

Understanding this concept is crucial, as it helps illustrate how markets function and how prices are determined. When the market is at equilibrium, resources are allocated efficiently, and there are no pressures for price changes unless external factors like shifts in demand or supply occur.