In a free, unregulated market system, market forces establish equilibrium prices and exchange quantities. While equilibrium conditions may be efficient, it may be true that not everyone is satisfied
Do the equilibrium price and quantity maximize the total welfare of buyers and sellers? Market equilibrium reflects the way markets allocate scarce resources. Whether the market allocation is desirable is determined by welfare economics
Market Efficiency - Market Failures Recall that: Adam Smith’s “invisible hand” of the marketplace leads selfinterested buyers and sellers in a market to maximize the total benefit that society can derive from a market