Market equilibrium occurs where quantity demanded equals quantity supplied. At this price (equilibrium price), there is neither shortage nor surplus, and the market clears. If price is above equilibrium, surplus pressures prices down; if below, shortage pressures prices up. Equilibrium is the natural resting point of a market.
You have already studied the individual demand curve — how a single consumer's desired quantity falls as price rises — and the individual supply curve — how a single firm's offered quantity rises as price rises. Market equilibrium is what happens when you aggregate all buyers and all sellers and ask: is there a price at which the total amount buyers want equals the total amount sellers want to provide? That price is the equilibrium price, and the matching quantity is the equilibrium quantity.
The mechanism that drives markets toward equilibrium is the pressure created by surplus and shortage. Suppose the current market price is above equilibrium. At that high price, sellers want to supply more than buyers want to purchase — a surplus accumulates. Sellers holding unsold inventory have an incentive to cut their prices to move product, and competition among sellers pushes the market price down. Conversely, if the current price is below equilibrium, buyers want more than sellers are willing to provide — a shortage develops. Buyers compete for the scarce goods, bidding prices up, and sellers realize they can charge more. In both cases, the price adjustment is a response to real incentives, not coordination by an outside authority.
Market clearing is the term for what happens at equilibrium: the market "clears" in the sense that no unsold inventory accumulates and no unsatisfied buyers leave empty-handed. The equilibrium price is the price that simultaneously clears the market from both sides. This is sometimes called the Walrasian auctioneer analogy — as if an invisible auctioneer calls prices until supply matches demand, then declares the market cleared. Real markets achieve this through the decentralized behavior of buyers and sellers adjusting to price signals.
A useful way to think about equilibrium is as a balance of opposing pressures. At any price above equilibrium, downward pressure dominates. At any price below equilibrium, upward pressure dominates. Only at the equilibrium price do the forces balance — no pressure to change. This is why equilibrium is a resting point rather than a transient state: unless something external shifts a supply or demand curve, the market tends to stay at equilibrium once it reaches it. When you later study elasticity, you will see that how *quickly* markets adjust and how the price change divides between buyers and sellers depends on the shapes of those curves — but the logic of market clearing is the foundation for all of it.