Key terms
- Price ceiling
- A price ceiling is a legal maximum price that buyers pay for a good or service.
- Price floor
- A price floor is the lowest price that buyers can legally pay for a good or service.
Predict first
A city caps rents below the market rent to help renters. What do you think happens to the number of flats actually rented?
Renters want more flats at the lower rent, but landlords offer fewer, and a flat is only rented if a landlord offers it. So the number rented falls to what landlords supply at the capped rent.