Price ceiling
Definition. A price ceiling is a legally imposed maximum price set below the free market equilibrium price, intended to keep a good affordable for consumers. Because the controlled price lies below equilibrium, quantity demanded exceeds quantity supplied, creating a persistent shortage.
Price ceilings can lead to queues, black markets, and the need for rationing. Common examples include rent controls and caps on the prices of essential goods.
This term belongs to Price Controls: Ceilings and Floors in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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