Maximum Price Control(Price Ceiling):

A maximum price or price ceiling is a legal price set below the equilibrium market price above which a seller cannot change for a product. It is set to safeguard consumers when the equilibrium market price for a commodity is found to be unfairly high. Maximum prices are normally set for essential goods such as pharmaceutical drugs or services such as house rental. When a maximum price is set for a good it increases the quantity demanded while the quantity supplied decreases thereby resulting in persistent excess demand or shortage of the good.

From Figure the equilibrium market price is OPe which may be unfairly high calling for the setting of a price ceiling of OPmx. Because the price ceiling is not a market clearing price, quantity demanded will increase from OQe to OQd while quantity supplied will decrease from OQe to OQs. The resulting shortage is QsQd or AB. This re-affirms the assertion that whenever a price ceiling is set for a good it results in persistent shortage of the good.