Microeconomics Black Market Question

  • Thread starter tokuroka
  • Start date
However, when demand is inelastic, the number of consumers willing to buy at the higher price decreases, resulting in a smaller difference between the black-market price and the equilibrium price. This is due to the fact that black-market prices are driven by scarcity and the willingness of consumers to pay higher prices. In summary, the extent to which the black-market price exceeds the equilibrium price depends on the elasticity of demand.
  • #1
tokuroka
6
0
Q: Under which demand conditions is it likely that a black-market price will only moderately exceed the natural equilibrium price?

Attempt at solving: So for black-markets, I understand that a price ceiling is present below the equilibrium price, and thus black-marketeers buy out the supply at that ceiling price and sell at the corresponding higher demand price. This results in profit for the black marketeers. What I don't really understand is what this question wants me to answer with. I assume elastic demand will result in lower profits for the black marketeers, simply from graphical inference. Is that all there is to this question? Stating whether demand should be inelastic or elastic?

Thanks.
 
Physics news on Phys.org
  • #2
Answer: Black-market prices will only moderately exceed the natural equilibrium price when demand is inelastic. When demand is elastic, the black-market price can exceed the equilibrium price by a larger amount as there are more consumers willing to buy at the higher price.
 

What is a black market?

A black market is an illegal or underground market where goods or services are bought and sold outside of the legal system. This can include activities such as selling stolen goods, counterfeit products, or illegal drugs.

What is the difference between microeconomics and macroeconomics?

Microeconomics is the study of individual economic behavior and decision-making, while macroeconomics looks at the broader economy as a whole.

Why do black markets exist?

Black markets exist because of government regulations, high taxes, and other barriers to legal trade. People may turn to the black market to avoid these restrictions or to find goods that are in short supply.

What are the consequences of participating in the black market?

Participating in the black market can have serious consequences, including fines, imprisonment, and damage to the economy. It also creates an unfair advantage for those who participate in illegal activities.

How does the black market affect the economy?

The black market can have a negative impact on the economy by depriving the government of tax revenue, promoting corruption and crime, and distorting market prices. It can also lead to a decrease in consumer confidence and hinder economic growth.

Similar threads

  • Biology and Chemistry Homework Help
Replies
1
Views
3K
  • General Discussion
2
Replies
46
Views
3K
Replies
10
Views
951
  • General Discussion
Replies
22
Views
30K
  • Precalculus Mathematics Homework Help
Replies
11
Views
4K
  • Set Theory, Logic, Probability, Statistics
Replies
6
Views
2K
  • General Discussion
Replies
9
Views
10K
  • Set Theory, Logic, Probability, Statistics
Replies
4
Views
2K
  • General Discussion
Replies
6
Views
5K
Back
Top