What is a Black Market?

A black market refers to the economic situation that occurs beyond federal-approved channels or sources. Such transactions are a result of under the table activities that help individuals avoid taxes or control prices.

How Does a Black Market Work?

Black markets are the places that involve the trading of illegal products or substances like drugs, firearms, etc. They can have a negative impact on the economy as they operate as shadow markets that dont record economic activity and dont consider payment of taxes. Countries with major regulations over currency have the largest black markets. Most of the times, people avoid black markets because of their corrupt nature. However, there are times when they dont have any other option except accepting this wicked thing. There are many shortcomings associated with the black market. Some of them include fraudulent activities, inferior quality or duplicate products, chances of violent activities, etc. Besides strict currency control policies, black markets can also be found in countries that lack strong economic benchmarks including more inflation and less currency reserves, and have a constant exchange rate where national currency is pegged at an unwanted high rates to the U.S. or other nations currency. Therefore, such markets can be easily seen in countries such as Iran and Argentina.

The Necessity of Black Markets

There can be times when there is no other alternative except black markets for producing goods. For instance, if you are spending an amazing vacation with your family in an exquisite location and suddenly, you get short of formula for your newly born. First of all, you will try finding it in nearby stores, but in case, you are unable to find it, you wont hesitate making a black market purchase for getting that baby formula. If you pay more than the face value of a ticket for a music event, it will also be considered as a black market transaction. There are many nations where there is limited supply of crucial medicines, and in order to get them, one has to buy them from the black market. Though critics believe that it only increases unethical practices in the market, but being a part of the black market and making transactions to protect somebody's life can be quite easy for someone.