What type of price ceiling is set below the market equilibrium price?

A price ceiling set below the market equilibrium price is called a binding price ceiling.

A price ceiling is a legal maximum price. It is binding when the maximum lies below the price the market would otherwise reach, so the rule actually prevents the equilibrium price from being charged. At that controlled price, quantity demanded is greater than quantity supplied, producing a shortage in the standard supply-and-demand model.

Rent controls are a frequently discussed example, although their effects depend on the exact design, market conditions, and time period. Possible consequences include queues, non-price allocation, reduced maintenance or new construction, quality changes, and informal or illegal side payments. These outcomes are not inevitable in identical form because real regulations vary.

A ceiling at or above equilibrium is nonbinding and does not constrain the market price in the basic model. This differs from a price floor, which sets a legal minimum and can create a surplus when placed above equilibrium, as in some agricultural or labor-market policies.