Price Ceiling refers to the maximum price a government allows for a particular good or service, beyond which sellers cannot legally charge consumers. It is a form of price control implemented to protect buyers from excessively high prices, especially for essential commodities like food, fuel, or housing. A price ceiling ensures affordability but can also create challenges in market equilibrium.

In economics, a price ceiling is typically set below the equilibrium priceóthe point where supply and demand meet. When prices are restricted below this level, demand often rises as consumers seek cheaper goods, while suppliers may produce less due to reduced profitability. This imbalance can lead to shortages, where the quantity demanded exceeds the quantity supplied.

For example, if the government imposes a ceiling on rent prices to make housing affordable, landlords might find it less profitable to maintain or construct new rental units. As a result, the supply of available housing could decline, leading to scarcity or longer waiting periods for tenants. Similar effects can be seen in markets for essential goods like cooking oil or medicines when price caps are enforced.

Although the primary goal of a price ceiling is consumer protection, it may also create black markets or informal trading, where goods are sold illegally at higher prices. Policymakers must therefore balance affordability with sustainability by coupling price ceilings with supportive measures such as subsidies, incentives for producers, or efficient distribution systems.

In summary, a price ceiling helps control inflation and ensures equitable access to vital goods, but it must be implemented carefully to avoid market inefficiencies and unintended economic distortions.