Prices ceilings misallocate resources because with them resources are not necessarily allocated to their highest-valued use.

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Price ceilings, which limit the price that can be charged for a good or service, may lead to a misallocation of resources. When prices are artificially low, there is no guarantee that goods and services will be allocated to their highest-valued use, as consumers may demand more than suppliers can provide at the artificially low price. This can lead to shortages, rationing, and reduced incentive for producers to bring products to market.

Prices Ceilings Misallocate Resources Because with Them Resources Are Not