What could potentially lead to the formation of a black market?
Understand the Problem
The question is asking about the factors that may cause a black market to emerge. It presents multiple-choice options, and we need to evaluate which scenario could lead to the existence of a black market, particularly focusing on economic principles like price ceilings and floors.
Answer
Restrictions, shortages, and government controls can lead to black markets.
The main factors that lead to the formation of a black market include restrictions like licensing laws, taxation, prohibitions, shortages of goods or services, and government controls such as price ceilings.
Answer for screen readers
The main factors that lead to the formation of a black market include restrictions like licensing laws, taxation, prohibitions, shortages of goods or services, and government controls such as price ceilings.
More Information
Black markets often arise when governments impose strict regulations that limit the availability of goods or services or when there are prohibitive taxes. In these situations, people look for alternative ways to buy or sell goods, leading to the informal economy of black markets.
Tips
One common mistake is assuming that black markets only deal with illegal goods. They can also involve legally obtained goods that are sold illegally to evade taxes or regulations.
Sources
- Mechanics of a Black Market - Investopedia - investopedia.com
- Problem 3 What is a black market? Under wh... [FREE SOLUTION] - vaia.com
- The Emergence of Black Markets in Response to Price Control - fastercapital.com
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