Many historians believe Julius Caesar enacted a law stating a landlord could not charge more than the ancient Roman equivalent of $100 per year for a home in Rome. This came after a Roman senator appealed to the courts claiming his landlord tried to double his rent and he could no longer pay it.

When a price ceiling is set below the equilibrium price, quantity demanded will exceed quantity supplied, and excess demand or shortages will result.

The term “rent ceiling” refers to the maximum amount of rent a landlord is allowed to charge a tenant. Rent ceilings are a form of rent control and are usually set by law, limiting how high the rent can go in a specified area at any given time.

Rent control is a government program that places a limit on the amount that a landlord can demand for leasing a home or renewing a lease. Rent control laws are usually enacted by municipalities, and the details vary widely. All are intended to keep living costs affordable for lower-income residents.

Price ceilings do not simply benefit renters at the expense of landlords. Price ceilings are enacted in an attempt to keep prices low for those who need the product. However, when the market price is not allowed to rise to the equilibrium level, quantity demanded exceeds quantity supplied, and thus a shortage occurs.

Price ceilings only become a problem when they are set below the market equilibrium price. When the ceiling is set below the market price, there will be excess demand or a supply shortage. Producers won’t produce as much at the lower price, while consumers will demand more because the goods are cheaper.

Price ceilings prevent a price from rising above a certain level. When a price ceiling is set below the equilibrium price, quantity demanded will exceed quantity supplied, and excess demand or shortages will result.

Binding price ceilings encourage the formation of a black market. Why would a politician find it difficult to remove a binding price ceiling? Because it greatly benefits some consumers who are also voters. They do not change the quantity of goods bought or sold in the legal market.

What will happen in a market where a nonbinding price floor is removed? Setting a price ceiling below the equilibrium price can result in: a shortage, where the quantity demanded exceeds the quantity supplied.

A binding price ceiling causes the quantity demanded to exceed the quantity supplied creating a shortage.