A price ceiling is a government-imposed limit on the price charged for a product. Governments intend price ceilings to protect consumers from conditions that could make necessary commodities unattainable. However, a price ceiling can cause problems if imposed for a long period without controlled rationing. Price ceilings can produce negative results when the correct solution would have been to increase supply. Misuse occurs when a government misdiagnoses a price as too high when the real problem is that the supply is too low. In an unregulated market economy price ceilings do not exist. Students may incorrectly perceive a price ceiling as being on top of a supply and demand curve when in fact, an effective price ceiling is positioned below the equilibrium position on the graph.
Famous quotes containing the words price and/or ceiling:
“I would rather have as my patron a host of anonymous citizens digging into their own pockets for the price of a book or a magazine than a small body of enlightened and responsible men administering public funds. I would rather chance my personal vision of truth striking home here and there in the chaos of publication that exists than attempt to filter it through a few sets of official, honorably public-spirited scruples.”
—John Updike (b. 1932)
“What made the ceiling waterproof?
Landor’s tarpaulin on the roof.”
—William Butler Yeats (1865–1939)