Price ceiling — shortage and deadweight loss

Example numbers — demand P = 100 − Q, supply P = 20 + Q. Straight lines to show the mechanism, not a real market.

Shortage20
Quantity traded40 → 30
Deadweight loss100

The ceiling is below equilibrium. At this price sellers offer 30 and buyers want 50. Only the smaller amount, 30, is traded; the orange triangle is the deadweight loss from the trades that no longer happen.

002020404060608080100100Price ↑Quantity →DemandSupplyCeiling 50equilibriumshortage

Not in this calculation

  • Curved supply and demand — the example uses two straight lines
  • Who gets the scarce goods — queues, rationing and other ways of sharing them out
  • Supply and demand shifting over time
  • A cap on what generators are paid (the SMP cap) — it does not work like a cap on consumer prices

Using the example values

Tool: Renuary (CC BY 4.0) · Numbers are examples. Method and limits on the original page.