It’s a busy afternoon at the supermarket; there are long lines at the checkout counters. Then one of the previously closed cash registers opens. What happens? The first thing, of course, is a rush to that register. After a couple of minutes, however, things will have settled down; shoppers will have rearranged themselves so that the line at the newly opened register is about the same length as the lines at all the other registers.

How do we know that? We know from our fourth principle that people will exploit opportunities to make themselves better off. This means that people will rush to the newly opened register in order to save time standing in line. And things will settle down when shoppers can no longer improve their position by switching lines—that is, when the opportunities to make themselves better off have all been exploited.

A story about supermarket checkout lines may seem to have little to do with how individual choices interact, but in fact it illustrates an important principle. A situation in which individuals cannot make themselves better off by doing something different—the situation in which all the checkout lines are the same length—is what economists call an equilibrium. An economic situation is in equilibrium when no individual would be better off doing something different.

Recall the story about the mythical Jiffy Lube, where it was supposedly cheaper to leave your car for an oil change than to pay for parking. If the opportunity had really existed and people were still paying $30 to park in garages, the situation would not have been an equilibrium. And that should have been a giveaway that the story couldn’t be true. In reality, people would have seized an opportunity to park cheaply, just as they seize opportunities to save time at the checkout line. And in so doing they would have eliminated the opportunity! Either it would have become very hard to get an appointment for an oil change or the price of a lube job would have increased to the point that it was no longer an attractive option (unless you really needed a lube job). This brings us to our sixth principle:

Because people respond to incentives, markets move toward equilibrium.

As we will see, markets usually reach equilibrium via changes in prices, which rise or fall until no opportunities for individuals to make themselves better off remain.

The concept of equilibrium is extremely helpful in understanding economic interactions because it provides a way of cutting through the sometimes complex details of those interactions. To understand what happens when a new line is opened at a supermarket, you don’t need to worry about exactly how shoppers rearrange themselves, who moves ahead of whom, which register just opened, and so on. What you need to know is that any time there is a change, the situation will move to an equilibrium.

The fact that markets move toward equilibrium is why we can depend on them to work in a predictable way. In fact, we can trust markets to supply us with the essentials of life. For example, people who live in big cities can be sure that the supermarket shelves will always be fully stocked. Why? Because if some merchants who distribute food didn’t make deliveries, a big profit opportunity would be created for any merchant who did—and there would be a rush to supply food, just like the rush to a newly opened cash register.

So the market ensures that food will always be available for city dwellers. And, returning to our fifth principle, this allows city dwellers to be city dwellers—to specialize in doing city jobs rather than living on farms and growing their own food.

A market economy, as we have seen, allows people to achieve gains from trade. But how do we know how well such an economy is doing? The next principle gives us a standard to use in evaluating an economy’s performance.