What term describes the maximum price set by the government on a good or service?

The term that describes the maximum price set by the government on a good or service is a price ceiling. A price ceiling is established to protect consumers from excessively high prices, ensuring that essential goods remain affordable. When a price ceiling is enforced, sellers are legally barred from charging more than the designated maximum price, even if the market equilibrium price would be higher due to demand and supply factors.

Price ceilings are often applied to necessities such as food and housing to prevent price gouging during emergencies or shortages. However, while they can help consumers in the short term, they may lead to unintended consequences, such as product shortages, as producers may not find it profitable to supply at the lower price.

In contrast, a price floor is the minimum price set by the government, typically used to ensure that producers can cover their costs. Market price refers to the price determined by supply and demand in a competitive market, and supply price is related to the amount suppliers are willing to produce at a given price.