Okuzeka
Economics vocabulary · Markets, Supply and Demand

Price ceiling

Meaning in economics, with examples

nounCommon term

In economics, price ceiling means: A legal maximum price that sellers are allowed to charge for a good or service, such as a limit on rents or on bread prices.

In Turkish: tavan fiyat, azami fiyat

How it is used

Also called a price cap. Textbooks show that a binding price ceiling, set below the equilibrium price, causes a shortage and can lead to queues or black markets. News reports talk about governments imposing or lifting a price cap.

Example sentences

  1. The price ceiling on rents has made it harder to find a flat.

  2. A price ceiling below the market price creates a shortage.

Common collocations

  • impose a price ceiling
  • binding price ceiling
  • price cap
  • lift the price ceiling
  • price floorA legal minimum price for a good or service, set by the government to protect producers or workers; the minimum wage is the best-known example.
  • shortageA situation in which buyers want more of a product than sellers offer at the current price, often because the price is held below equilibrium.
  • equilibriumA situation in which supply and demand are equal, so there is no pressure for the price or the quantity to change.
  • market failureA situation in which a free market, left alone, does not produce an efficient outcome for society, so too much or too little of something is produced.

More terms: Markets, Supply and Demand

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This page explains English vocabulary for learners. It is not financial advice.