A regulation that prohibits the payment for a good or service that is higher than an alloted price. Similar to price floors, it is used by government and other governing bodies.

The alloted price must be below the equilibrium price as otherwise, it would not cause an effect on the markets in question. What this causes is a shortage in the good or service and creates inefficiency. It does it in two ways:
1) Through search activity
2) Deadweight Loss

1) Due to a shortage, people will be spending their time and resources looking for the good or service. For example, if there is a shortage for quality housing, people will be using their resources like gas, and time to look for housing. In turn, the opportunity cost increases by this time factor and other resource factors. This creates a loss of consumer surplus and producer surplus.

2) Since the set point is below the equilibrium price, there is an inefficiency in the market as the demand is much higher than the supply, there is a shortage. This creates a situation where there is a deadweight loss which in turn, like search activity, generates a loss in both consumer surplus and producer surplus.