What is a price ceiling?

A price ceiling is defined as a maximum price established by law at which a good or service can be sold. This regulatory measure is put in place to protect consumers from prices that may be deemed excessively high, particularly in essential markets such as housing or food. For example, if a government implements a price ceiling on rent, landlords would be legally prohibited from charging above that set maximum, thereby making housing more affordable for tenants.

The intention behind a price ceiling is to prevent prices from reaching levels that could limit access for lower-income households, thus aiming to ensure basic needs are met. However, while price ceilings can provide short-term consumer relief, they might lead to unintended consequences, such as shortages, if the ceiling is set below the market equilibrium price.

The other options describe different concepts in economic regulation. A minimum price would create a floor that ensures sellers can receive a fair price, while a tax on goods involves governmental financial charges that aim to influence market behavior. An agreement among sellers concerning pricing aligns with anti-competitive practices, often observed in cartels. Each of these options represents distinct economic strategies and impacts, differentiating them from the straightforward concept of a price ceiling.