1. Price Ceiling S Price PE D QE Quantity
Look at the Market Equilibrium Price and the Market Equilibrium Quantity

2. Price Ceiling
A Price Ceiling is a Maximum Price set by the government. When a Price Ceiling is legislated, a good can not be sold for a price higher than the legislated price. For example, if the government sets the price at $4.00, this is the highest price the good can be sold.

3. Price Ceiling S Price PE D QE Quantity
A Price Ceiling has been set by the government. A good cannot be sold for a higher price.
Where is the Price Ceiling in relationship to the Market Equilibrium Price?

4. Price Ceiling S Price PE Price Ceiling D QS QD Quantity
The quantity demanded is greater than the quantity supplied. A shortage of the good exists. There is excess demand.

5. Price Ceiling S Price PE Price Ceiling D QS QD Quantity
In order for the Price Ceiling to be effective, the maximum price must be set below the market equilibrium price.
Can you explain why?