Price Ceiling


DEFINITION of 'Price Ceiling'

The maximum price a seller is allowed to charge for a product or service. Price ceilings are usually set by law and limit the seller pricing system to ensure fair and reasonable business practices. Price ceilings are usually set for essential expenses; for example, some areas have "rent ceilings" to protect renters from climbing rent prices.


Loading the player...

BREAKING DOWN 'Price Ceiling'

Price ceilings are regulations designed to protect low income individuals from not being able to afford important resources. However, many economists question their effectiveness for several reasons. For example, price ceilings will have no effect if the equilibrium price of the good is below the ceiling. If the ceiling is set below the equilibrium level, however, then there is a deadweight loss created. Other problems come in the form of black markets, search time, and fees, which are added but not directly associated with the sale - for example a high charge for fittings could be added to a maxed out rental cost.

  1. Law Of Supply

    A microeconomic law stating that, all other factors being equal, ...
  2. Law Of Demand

    A microeconomic law that states that, all other factors being ...
  3. Price Controls

    Government mandated minimum or maximum prices that can be charged ...
  4. Quantity Supplied

    A term used in economics to describe the amount of goods or services ...
  5. Floor

    The lowest acceptable limit as restricted by controlling parties. ...
  6. Ceiling

    The maximum level permissible in a financial transaction. Ceiling ...
Related Articles
  1. Economics

    What's a Price Ceiling?

    A price ceiling is the maximum amount a seller can charge for a product or service.
  2. Economics

    A Practical Look At Microeconomics

    Learn how individual decision-making turns the gears of our economy.
  3. Personal Finance


    This tutorial teaches the basics of one of the most important economic topics. A must for all investors.
  4. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  5. Investing Basics

    Why Interest Rates Affect Everyone

    Learn why interest rates are one of the most important economic variables and how every individual and business is affected by rate changes.
  6. Investing

    Where the Price is Right for Dividends

    There are two broad schools of thought for equity income investing: The first pays the highest dividend yields and the second focuses on healthy yields.
  7. Personal Finance

    How Tech Can Help with 3 Behavioral Finance Biases

    Even if you’re a finance or statistics expert, you’re not immune to common decision-making mistakes that can negatively impact your finances.
  8. Investing Basics

    5 Tips For Diversifying Your Portfolio

    A diversified portfolio will protect you in a tough market. Get some solid tips here!
  9. Entrepreneurship

    Identifying And Managing Business Risks

    There are a lot of risks associated with running a business, but there are an equal number of ways to prepare for and manage them.
  10. Forex Education

    Explaining Uncovered Interest Rate Parity

    Uncovered interest rate parity is when the difference in interest rates between two nations is equal to the expected change in exchange rates.
  1. For what sorts of purposes can the funds in a share premium account be disbursed?

    Deadweight loss is the cost of market inefficiencies due to government regulations that prohibit natural market equilibrium. ... Read Full Answer >>
  2. How do you make working capital adjustments in transfer pricing?

    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
  3. Do interest rates increase during a recession?

    Interest rates rarely increase during a recession. Actually, the opposite tends to happen; as the economy contracts, interest ... Read Full Answer >>
  4. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>
  5. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  6. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center