Price ceiling
Also called: price floor, price control, rent control, minimum wage
A price ceiling is a legal maximum price, like rent control; a price floor is a legal minimum, like a minimum wage. A binding ceiling causes shortages and a binding floor causes surpluses.
Economists debate how large these effects are in practice, especially for minimum wages, where studies disagree about job losses.
Related terms
- Supply and demand: Supply and demand is the model that explains prices: when more people want something than is available, its price rises; when more is available than people want, its price falls.
- Market equilibrium: Market equilibrium is the price at which the quantity buyers want equals the quantity sellers offer, so there's no shortage or surplus.
- Deadweight loss: Deadweight loss is the value lost to society when a market produces less (or more) than the efficient quantity, often because of a tax, price control or monopoly.
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