This is the ultimate
equilibrium between the consumer and the producer in
economics. It's exactly what every producer
strives for.
Producers wish to charge the
highest price possible. They are willing to make a certain amount of an item, let's say
pencils, and charge a certain price. Depending on the price they charge for the
pencils, the lower the price, the higher the
demand, thanks to the
economic law of
supply and demand.
When the supply of
pencils exactly meets the demand of the
consumer, then the market clearing price is
acheived and everyone is happy.
Example: At 15 cents,
consumers will buy 3,000
pencils, however this is less than the
producer is willing to sell the
pencils for. At 35 cents,
consumers will buy 1,000
pencils which is less than the
producer wishes to sell.
However, at 25 cents the
consumer will purchase 2,000
pencils which is as much as the
producer is willing to make and at a price the
producer will sell. The market clearing price has been met.