ECONOMICS
MARKETS AND PRICES
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Supply shock
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price floor
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rationing
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equilibrium
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Detailed explanation-1: -Black markets typically arise when the government attempts to control prices or imposes an excessively high tax burden on transactions. For example, when a government imposes price controls on fuel, individuals willing to pay more than the fixed rate will form the demand side of a black market.
Detailed explanation-2: -Examples of underground markets include the sale of illegal drugs, weapons, human trafficking, and the illegal wildlife trade.
Detailed explanation-3: -Cash is the preferred medium of exchange in illegal transactions since cash transactions are less-easily traced. Common motives for operating in black markets are to trade contraband, avoid taxes and regulations, or skirt price controls or rationing.
Detailed explanation-4: -Consumers make up for goods that are rationed by finding substitutes, like margarine in place of butter.