What is a price ceiling?

A price ceiling is defined as an upper limit set by the government or a regulatory body on how much a product can legally be sold for in the market. The primary purpose of a price ceiling is to protect consumers from prices that might be considered too high or unaffordable, especially for essential goods and services. By establishing this limit, a price ceiling aims to ensure that basic commodities remain accessible to a wider population.

Implementing a price ceiling can lead to a situation where the market price is lower than what would be determined by supply and demand, possibly resulting in shortages as producers may be unwilling to supply enough of the product at the lower price. It's important to understand that this concept is fundamental in economics, as it impacts both consumers and producers in the market.

The other options reflect common terms in economics but do not accurately describe a price ceiling. A lower limit on a product's price refers to a price floor, which is the opposite concept. Setting equilibrium prices is a function of how supply and demand interact, not a direct definition of a price ceiling. The actual selling price of a product can fluctuate based on market conditions and does not denote a price ceiling.