How Does the Black Market Affect the Supply & Demand of Today's Economy?

by Osmond Vitez - Updated September 26, 2017

Black markets make up an economic system that operates outside of the normal means of production and acquisition of goods and services. While often found in countries with heavily controlled economies, they also exist in more developed countries, affecting the supply and demand of products.

Defined

A black market will sell goods and services on an individual level, primarily between single individuals rather than businesses. These markets attempt to subvert government price controls, although individuals may steal items and sell them on the black market to earn a profit.

Features

Supply and demand is a basic economic concept where businesses attempt to set prices that will maximize the sales of goods and services. Black markets may provide substitute goods that are not found in the current economy or have better features than current products. Black market sales will lower the demand for products produced by companies.

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Effects

Black market sales will skew the numbers a company will use to calculate its supply output. If companies expect a certain number of sales and those numbers decrease due to a thriving black market, companies will have overstocked inventory. Additionally, the goods sold by a company may have less value than black market goods, resulting in lower consumer demand.

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