What is a black market? Question options: It is an illegal market that emerges when binding and nonbinding price controls are in place. It is an illegal market that emerges when binding price ceilings are in place. It is an illegal market that emerges when only binding price ceilings and binding price floors are in place. It is an illegal market that emerges when no price controls are present. It is an illegal market that emerges when binding price floors are in place.

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Josie Adkins

Business

17 February, 07:13

What is a black market? Question options: It is an illegal market that emerges when binding and nonbinding price controls are in place. It is an illegal market that emerges when binding price ceilings are in place. It is an illegal market that emerges when only binding price ceilings and binding price floors are in place. It is an illegal market that emerges when no price controls are present. It is an illegal market that emerges when binding price floors are in place.

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Madeleine Carney · Answer 1

It is an illegal market that emerges when only binding price ceilings and binding price floors are in place.

Explanation:

A black market can be defined as an illegal market that emerges as a result of binding price ceilings and price floors.

A binding price ceiling fixes the price below the equilibrium market price. This creates a shortage in the market as the quantity demanded is greater than quantity supplied. This causes a black market to emerge where the price is above ceiling limit.

Similarly, a binding price floor fixes price above the equilibrium level. This creates a surplus in the market where the quantity supplied is greater than quantity demanded. So a black market emerges where the price is lower than the floor limit.