Equilibrium demand and supply is a fundamental concept in economics, wherein the market price of a good or service is determined by the interaction between its buyers and sellers. It occurs when the amount of goods and services supplied to consumers equals the amount demanded at a given price level. In this situation, there is no tendency for prices to change as long as all other economic conditions remain the same. Equilibrium demand and supply helps to determine the free market economy’s optimal output and price level, creating a stable and efficient resource allocation.