Why does an engine bleed system failure restrict operating elevation?
Without more details on the specific aircraft you are talking about, it isn't possible to give a very specific answer.

In general, if a commercial aircraft is unable to pressurize the cabin fully (usually to &lt;8,000 ft, thanks @jwzumwalt, for both safety and comfort reasons), the operating ceiling is reduced to compensate. The human body doesn't play nicely with high altitudes, so to make sure that passengers and crew don't asphyxiate, the cabin must be pressurized to a safe level.

If one of the engine bleed air systems is inoperative, which among many other things provides for cabin pressurization, the remaining compressed air capacity is diverted to more mission-critical systems on the aircraft. This leaves the cabin pressurization system starved of the compressed air it needs, resulting in it not being able to fully pressurize the cabin to a safe and comfortable level.