Microeconomics Black Market Question

[tokuroka]

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.

 

[Nino MMP]

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.