Price Controls (Part 1): Binding Price Ceilings

Free markets are markets where prices are allowed to adjust to clear shortages or surpluses. In other words, if prices are allowed to adjust to market changes (changes in either market supply or market demand) there will be no long term shortages or surpluses. Binding price ceilings distort price signals, and since they keep prices artificially low they discourage supply and encourage a higher quantity demanded. This video is made for 1st year college students or AP/IB Economics students. It focuses on foundational economic concepts.