Black market

Black market refers to the economic activity that takes place outside government-sanctioned channels. Black markets thrive when the state places restrictions on the production, distribution or price of goods and services that command high demand. Black markets can also arise when people don't want to abide by certain social norms.

Overview

The black market is also known as the shadow economy, the underground economy or the informal economy. It encompasses all commerce that is illegally conducted. This can range from the sale of prohibited goods and services to the sale of legal goods and services without the payment of applicable taxes or without the necessary licenses.

Causes

Black markets arise for various reasons. Some common causes include economic controls, prohibition laws, and war. When the government imposes restrictions such as price controls or quotas, it can lead to shortages which in turn lead to the creation of black markets. Prohibition laws can also create black markets if there is still demand for the prohibited goods or services. War can lead to black markets as normal economic activity is disrupted and goods become scarce.

Impact

The impact of the black market is multifaceted. On one hand, it can have negative effects such as loss of tax revenue for the government, undermining of legitimate businesses, and potential public health risks. On the other hand, it can also have positive effects such as providing goods and services that are otherwise unavailable and providing income for people who might not have other means of earning a living.

See also

• Grey market
• Counterfeit
• Smuggling
• Tax evasion