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A price ceiling set below equilibrium creates a shortage and deadweight loss; rent control is a canonical example. A price floor set above equilibrium creates a surplus and deadweight loss; minimum wage and agricultural price supports are examples. Deadweight loss represents mutually beneficial trades that no longer occur because the price mechanism is prevented from clearing the market. The size of deadweight loss depends on the elasticities of supply and demand.
Draw the welfare triangles for both price ceilings and floors, decomposing total surplus before and after the control. Practice distinguishing effective vs. non-binding controls (a ceiling above equilibrium has no effect).
From your study of consumer and producer surplus, you know that a competitive equilibrium maximizes total welfare: the area between the demand and supply curves up to the equilibrium quantity, divided between consumers (surplus above price) and producers (surplus below price). Any intervention that moves the traded quantity away from equilibrium shrinks this total. The difference between pre- and post-intervention welfare is deadweight loss — the surplus that disappears entirely, accruing to no one.
A price ceiling is a legal maximum price, typically set below equilibrium to make a good "affordable." Take rent control: the government caps rent at $800 when the market would clear at $1,200. At $800, tenants want more apartments than landlords supply, creating a shortage. Landlords supply fewer units; some tenants who would willingly have paid more than $800 cannot find housing. The triangular area between the supply curve, the demand curve, and the controlled price — bounded by the new quantity supplied and the equilibrium quantity — is the deadweight loss. A crucial qualifier: a ceiling *above* equilibrium is non-binding and has no effect. The ceiling only matters when it actually constrains the price below what the market would set.
A price floor is the symmetric intervention: a legal minimum price set above equilibrium. Agricultural price supports and minimum wage laws are canonical examples. At the floor price, quantity supplied exceeds quantity demanded, creating a surplus — excess crops pile up in storage; more workers seek jobs at the minimum wage than employers want to hire. The deadweight loss is again the triangle of trades that would have occurred between the equilibrium and the floor price, but no longer do.
The size of deadweight loss depends on elasticities. Elastic supply and demand mean that small price distortions cause large quantity distortions — wide, flat triangles represent large welfare costs. Inelastic curves limit the quantity response, generating smaller triangles. The deeper point is that deadweight loss is not a transfer to anyone. Consumer surplus may rise (price ceilings) or fall (price floors); producer surplus moves in the opposite direction. But the deadweight loss is welfare that was in the system and is now gone: mutually beneficial trades that would have made both a buyer and a seller better off, which now simply do not happen.