Price Ceiling

A price ceiling is a government-imposed limit on the maximum price that can be charged for a particular good or service. Price ceilings are implemented to prevent prices from becoming too high, especially for essential goods like food, housing, or utilities. While intended to protect consumers from price gouging, price ceilings can lead to shortages, as the artificially low price may reduce supply while increasing demand beyond what is available.

Example

A government sets a price ceiling on rent to keep housing affordable, but this results in a shortage of rental properties as landlords are less incentivized to offer apartments at the lower price.