A price ceiling is the maximum legal price that sellers may charge for a good or service.
Governments may impose ceilings to make necessities more affordable. Rent controls, emergency price limits, and restrictions on utility charges are examples. A ceiling is binding when it is set below the market-clearing price. In that case, buyers want more than sellers are willing to provide, creating a shortage.
A ceiling set above the market price has no immediate effect because normal transactions already occur at a lower price. This is why the legal existence of a ceiling does not necessarily change the market outcome.
Price ceilings can also lead to waiting lines, rationing, lower quality, or unofficial payments when demand exceeds supply. They should not be confused with price floors, which establish a legal minimum. Minimum wage laws are a commonly discussed example of a price floor in the labor market, though their effects depend on market conditions and enforcement.