Definition
Price Ceiling
A legal maximum price set below the market-clearing price.
Definition
A legal maximum price set below the market-clearing price.
Why It Matters
Price ceilings are used in housing (rent control), energy, and medical care to make goods more affordable. They create shortages when set below the equilibrium price.
Policy Example
Rent control caps in New York City are a price ceiling on rental housing. Because the legal maximum is below what the market would charge, demand for controlled units exceeds supply — creating waitlists and the practice of "key money."
In Context