What Are Examples of Price Ceilings?
Examples of price ceilings include rent control in New York City, apartment price control in Finland, the Victorian Football League ceiling wage, state farm insurance in Australia and Venezuela’s price ceilings on food. Price ceilings set the maximum price that can be charged on a product or service in the market. They are usually set by law and restrict the seller's pricing system to guarantee fair and reasonable business practices.
Rent control is a classic example of a price ceiling. To ensure more affordable housing, the government often sets a price ceiling on rents. Rent control in New York City was established after World War II to ensure that soldiers and their families could pay rent and retain their homes. However, this increased demand for apartments and reduced supply. In a similar way, apartment price control in Finland led to economical inefficiencies.
Another example of price ceilings is that of usury laws. These laws prohibit charging excessive interest on loans. The law serves as a price ceiling because it stipulates the maximum interest rate that can be imposed on loans.
Price ceilings on gasoline by the U.S. government in the 1970s made gasoline more affordable to consumers. However, it resulted in a shortage due to increased demand.
Another example of a price ceiling involved the Coulter law regarding the VFL in Australia. This law introduced a ceiling wage of £3 in 1925, but it was later abolished in 1968. Finally, price ceilings imposed on food by the government of Venezuela led to shortages and hoarding in 2008.