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What Are Price Ceilings and How Do They Impact Me? | TheStreet

What Is a Price Ceiling?
A price ceiling is an accounting term, with different variations and meaning, that fixes the highest price a company or individual can charge for a product or service. Price controls are designated by government regulators, theoretically in order to shield consumers from fast and substantial prices.

The term sets out to establish fair business practices, and makes it difficult for sellers to engage in price-gouging against buyers. Historically, price ceilings are established in times of great economic calamity, like depressions, wars, and natural disasters.

When demand for bread rose dramatically in ancient Rome, Emperor Diocletian issued a price ceiling on bread and declared the offense punishable by death. When bread makers started getting out of the business in fear of getting ensnared in a price control issue with the Roman government, Diocletian had to repeal his price decree, as few people were selling bread.

Fast forward to the 20th century, in the aftermath of Pearl Harbor. After the U.S. declared war against Germany and Japan in 1941, the Roosevelt administration imposed prices controls on various industries, like agriculture, steel and oil, to support the U.S. effort in World War II.

State governments tried the same approach after Hurricane Sandy devastated much of the U.S. Northeast in 2012. Both New York and New Jersey imposed price controls to prevent price gouging, leading to shortages of much-needed supplies like water and gasoline.

Another example of price ceilings is rent control. Here, cities impose maximum limits on the price landlords owners can charge for rent – New York City has issued rent control and rent stabilization edicts for years.

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What Are Price Ceilings and How Do They Impact Me? – TheStreet.

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