Short Answer 
The market equilibrium is identified by analyzing the intersection of supply and demand curves, which indicates a balance where consumer demand matches producer supply. The equilibrium price is defined at this intersection, representing the cost at which demand equals supply, while the equilibrium quantity reflects the actual amount sold at this price, indicating market activity and efficiency.
Identify the Intersection
The first step in understanding market equilibrium is to analyze the supply and demand curves. At market equilibrium, these two curves will meet at a specific point, indicating a balance. This intersection is crucial because it shows where consumers’ demand matches producers’ supply.
Determine Equilibrium Price
Once you’ve found the intersection point of the supply and demand curves, you can determine the equilibrium price. This price is significant because it represents the cost at which the quantity demanded by consumers equals the quantity supplied by producers. Identifying this price is essential for understanding market stability.
Establish Equilibrium Quantity
The final step is to establish the equilibrium quantity, which is the amount of goods or services sold at the equilibrium price. This quantity is equally critical as it reflects the actual market activity, representing both consumer interest and producer capacity. Knowing the equilibrium quantity helps assess overall market health and efficiency.