Theory of supply and market equilibrium

The theory of supply explains the relationship between the price of a good or service and the quantity producers are willing and able to supply, assuming other factors remain constant (ceteris paribus). It states that as the price of a good increases, the quantity supplied increases, and as the price decreases, the quantity supplied decreases, indicating a direct relationship between price and quantity supplied. Market equilibrium occurs at the point where the quantity demanded equals the quantity supplied, resulting in the equilibrium price and equilibrium quantity. At this point, there is neither a shortage nor a surplus in the market. Changes in demand or supply shift the equilibrium, causing prices and quantities to adjust until a new market equilibrium is established.