Market Efficiency:  

Basically, free markets allocate goods in a desirable way, since they maximize total surplus (consumer surplus + producer surplus). It can be noted that

Consumer Surplus = Value to buyers (price the consumer is willing to pay) - amount paid by buyers (price that he actually pays)

Producer Surplus = Amount received by producers - cost to sellers

Total Surplus is a sum of consumer surplus and producer surplus.

But since amount paid and received are the same, Total Surplus = Value to buyers - Cost to sellers

An allocation that maximizes surplus is said to be efficient. Unfortunately, an efficient system does not necessarily correspond to a fair one. Whether or not free market allocations are fair is known as division of equity. Any price differing from the market equilibrium price will reduce the total surplus. Because the market will arrive at the equilibrium price if it is allowed to move freely, a free market will allocate resource so as maximize surplus. In other words, free markets produce an efficient allocation.

It can be stated that a free market in equilibrium will allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay, allocate the demand for goods to the sellers who can produce them at least cost, and also produce the quantity of goods that maximizes the total surplus. Supposing that there is competition in the market but no significant externalities (or outside effects) of a transaction, the free market result is efficient and benefits both the producer and the buyer. It may or may not be fair since it depends on the existing distribution of income and wealth. It should be noted that it does take time for a free market to reach equilibrium (especially markets with new businesses), and projected equilibrium prices and quantities can change due to externalities.