Short-run equilibrium is when the aggregate amount of output is the same as the aggregate amount of demand. Long-run equilibrium is when prices adjust to changes in the market and the economy functions at its full potential.
For a market to be effective, it must be both efficient and balanced. If a market is currently balancing the amounts provided and sought, it has little incentive to deviate from its equilibrium price and quantity.
To achieve equilibrium, market supply and demand must be balanced, which results in stable price. In general, prices drop when there is a surplus of goods or services, which raises demand, while they rise when there is a shortage, which lowers demand.
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