What is a black market? What types of goods are likely to be traded in a black market? What are the problems that black markets pose in an economy?
What will be an ideal response?
The black market, sometimes referred to as the underground economy, is a non-legal market for regulated goods and services. Black markets could include legal activities where income taxes are not paid, as well as illegal activities, such as drug dealing and prostitution.
When black markets involve goods and services that have been legally banned, the black market undermines the ban. When black market transactions occur in markets for legal goods and services in order to avoid taxes or regulations, they put legitimate businesses at a disadvantage. To compensate for the lost revenue from black markets, governments must levy higher taxes. Criminals involved in the black market spend vast resources trying to elude the law, which is not an effective use of society's resources.
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