What is the function of a price ceiling?

The function of a price ceiling is to cap how high prices can be set. Price ceilings are regulatory measures imposed by governments that set a maximum allowable price that can be charged for a good or service in a market. This is often implemented to make essential goods, like food or housing, more affordable for consumers during times of economic distress or when there are significant increases in demand that might drive prices up too high.

By putting a cap on prices, governments aim to prevent situations where prices exceed a level that would make a good or service unaffordable for the average consumer, which can lead to negative social outcomes, such as increased poverty or homelessness. It's important to note that while price ceilings help consumers in the short term by keeping prices lower, they can also lead to shortages if the capped price is below the equilibrium market price, as suppliers may be less incentivized to produce or sell at that price.