Economic Impact of a Price Ceiling

A quickie on EO 389. The economy is efficient when a product is at equilibrium price and quantity level of supply and demand. Compared to equilibrium level, in a price ceiling scenario, suppliers will supply less since the selling price is too low and consumers will demand more for the same reason. The difference between the optimal and price ceiling scenario represents inefficiency in the economy. This also results in a supply shortage. At that price, consumers are willing to buy more than sellers are willing to sell. That inefficiency also represents opportunity for some black market selling.