How do binding price controls typically impact market efficiency?

Binding price controls, like price ceilings or price floors, can disrupt the natural balance of supply and demand in a market. When a price ceiling is set below the market equilibrium, it leads to shortages because sellers may not want to sell at the lower price, and buyers will demand more. For example, if the government limits the price of rent, landlords might not find it profitable to maintain or offer rental properties, causing a shortage of available homes. On the other hand, a binding price floor, such as a minimum wage that is too high, can lead to surpluses, where employers may hire fewer workers than needed. Overall, these controls can reduce market efficiency by preventing resources from being allocated where they are most valued.