Price Ceiling

A legal maximum on what can be charged for something.

A price ceiling set below the market-clearing level raises demand and reduces supply, producing shortages, queues, waiting lists or informal markets. Rent control and wartime price caps are the standard examples. Supporters argue the distributional benefit to existing holders outweighs the shortage; critics point to the housing that never gets built.

The price ceiling on rents kept existing tenants secure but left almost nothing available to rent.