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.
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.
References
- Auburn University: Black Market
- California Legislative Information. "Senate Bill No. 1520." Accessed March 11, 2020.
- New York City Taxi and Limousine Commission. "Medallion Taxicab Service," Page 10. Accessed March 11, 2020.
- Citylimits.org. "Need to Know: Taxi Medallions in New York." Accessed March 12, 2020.
- OnCuba News. "Cuban Minister acknowledges shortage of toiletries and other products." Accessed March 12, 2020.
- OECD. "Money Laundering and Terrorist Financing Awareness Handbook for Tax Examiners and Tax Auditors," Page 23. Accessed March 12, 2020.