Explain what is meant by market efficiency.

Market efficiency is the idea that markets, when left to
themselves, will always result in the production of the exact "right" amount of a good
or service.  When market efficiency has been achieved, there will be no customers left
who would like to have bought a good or service at the prevailing price.  Similarly,
there will be no suppliers left who still had goods or services they would have liked to
sell at that price.

Market efficiency relies on prices
being free to move and suppliers being free to increase or reduce production.  When
these conditions exist, there will be market efficiency.  If a shortage of a good or
service develops, the price will rise or producers will produce more of the good or
service.  If a surplus develops, the price will fall or the producers will reduce
production.

When these things happen, an equilibrium will
eventually be reached at a price and quantity where all demand has been met and all
supply has been sold.