Price Ceiling' is the maximum price that sellers can legally charge for a product or a service fixed by the government.

Since the price celling level is normally below equilibrium price, there would be excess demand for the good, in the market leading to shortage of good. Such shortages, could lead to black marketing of the good.

Detailed Answer :

Price Ceiling : It refers to fixing of the maximum price of a commodity at a level lower than the equilibrium price. Government imposes price ceiling in case of essential commodities (Wheat, Sugar, Kerosene etc.) when the equilibrium price determined by free market forces of demand and supply is high.

Implications of price ceiling :

(i) Shortage (excess demand) : At this controlled price quantity demanded is more than quantity supplied. It creates a shortage and to overcome this shortage government may enforce the rationing system.

(ii) Black marketing : If rationing is not administered by the government effectively it results in black marketing. Due to excess demand buyers will compete and they would be willing to buy a commodity at a higher price than the price fixed by the government.