I have trouble understanding this very elementary example of perturbation theory, especially the part marked in red ("It is because epsilon is variable that we can conclude that the coefficient of each power of epsilon in (7.1.5) is separately equal to zero"). Please help!
The given conclusion is valid because $$a\epsilon^2 + b\epsilon + c = \mathcal O(\epsilon^3) \qquad (\epsilon\to0)$$ Means that a quadratic polynomial must "shrink as fast as a cubic", wich is only possible if $a=b=c=0$. To see that you must consider the definition of $\mathcal O$. It says the following:
Now for this to hold it is already necessary that $a=b=c=0$, wich leads to the conclusion.