Final answer:
A price ceiling is a government intervention that causes the price that sellers get paid for the good to decrease.
Step-by-step explanation:
A price ceiling is a government intervention that causes the price that sellers get paid for the good to decrease. It prevents a price from rising above a certain level. When a price ceiling is set below the equilibrium price, quantity demanded exceeds quantity supplied, leading to excess demand or shortages.
Specifically, a price ceiling is a legal maximum on the price at which a good can be sold and is meant to be set below the natural market equilibrium. If the ceiling is set below the equilibrium level, it causes the price that sellers get paid to be less than what the market would typically dictate, potentially leading to a shortage as the quantity demanded at the ceiling price exceeds the quantity supplied. On the other hand, taxes on goods effectively reduce the seller's revenue because the cost partially falls on sellers regardless of whether the tax is imposed on buyers or sellers. Sellers receive less for their product because they must either increase the price to cover the tax, which could reduce the quantity sold, or they must lower their net price to maintain sales.