--- title: "Price Ceilings and Price Floors" description: "A ceiling is a legal maximum price and a floor is a legal minimum. In the competitive model, a ceiling below equilibrium creates a shortage and a floor above equilibrium creates a surplus. Effects can" canonical: https://lightmysky.com/learn/civics-and-economics/price-ceilings-and-price-floors-mt_ycfT-gkRVy source: https://lightmysky.com/learn/civics-and-economics/price-ceilings-and-price-floors-mt_ycfT-gkRVy.md retrieved: 2026-11-12 --- > **Agent view.** This is the Markdown twin of the page, for tools and assistants. > When to use this site, and the call that answers each job: https://lightmysky.com/agent-instructions.md > API description (OpenAPI 3.1): https://lightmysky.com/openapi.json · Authentication: https://lightmysky.com/auth.md > Pricing: https://lightmysky.com/pricing.md · Catalog: https://lightmysky.com/llms.txt · Full catalog: https://lightmysky.com/llms-full.txt > Every machine-readable file on this domain: https://lightmysky.com/.well-known/ai-catalog.json > Ask for Markdown with `Accept: text/markdown`, a `.md` address, or `?mode=agent`. # Price Ceilings and Price Floors A ceiling is a legal maximum price and a floor is a legal minimum. In the competitive model, a ceiling below equilibrium creates a shortage and a floor above equilibrium creates a surplus. Effects can include waiting lists, reduced upkeep and unsold stock. Subject: Civics & Economics · Area: Economics · Ages 15 to 16 Page: https://lightmysky.com/learn/civics-and-economics/price-ceilings-and-price-floors-mt_ycfT-gkRVy ## Ready when they can - Draw a binding price ceiling and mark the shortage it creates on the diagram - Name who gains and who loses under rent control, including the people who never get a flat and so never appear in the argument - Explain why elasticity decides how large the shortage or surplus turns out to be ## Lesson: When price controls open a gap Use the competitive model with downward-sloping demand and upward-sloping supply, holding other influences fixed. Equilibrium is where quantities demanded and supplied match. Above that price, sellers offer more than buyers want, leaving a surplus. Below it, buyers want more than sellers offer, leaving a shortage. If prices can adjust, these gaps put pressure on price. **Example.** A ceiling is a legal maximum price. It binds below equilibrium, creating a shortage. A floor is a legal minimum price. It binds above equilibrium, creating a surplus. For labour in this competitive model, workers supply work and employers demand it. A minimum wage above equilibrium leaves more labour offered than hired. Real labour markets can behave differently. A ceiling above equilibrium leaves the equilibrium price available, so it has no effect in this model. A binding rent ceiling can lower rent for tenants who obtain flats. Landlords receive less rent and may cut maintenance. Some applicants cannot find a flat at the capped rent. A report interviewing only landlords and current tenants misses those excluded applicants. Count benefits, lost access and changes in upkeep when judging the policy. Elasticity compares percentage changes in quantity and price. Start with the same equilibrium price and quantity and the same binding cap. With identical demand, more elastic supply over the price cut falls further, widening the shortage. In a separate comparison, if both curves are more elastic over the cut, supply falls further and demand rises further. Compare responses over the whole price change; elasticity at one point alone cannot rank shortages. **Recap.** In the competitive model, binding ceilings create shortages and binding floors create surpluses. Compare like conditions when using elasticity. ## Practice 8 questions on this page, each with its working shown. ## Needs first - [Price Elasticity of Demand](https://lightmysky.com/learn/civics-and-economics/price-elasticity-of-demand-mt_4ktSwG3D5q) ## Opens up - [Wages and the Labour Market](https://lightmysky.com/learn/civics-and-economics/wages-and-the-labour-market-mt_GhsftwhrYS)