black market

(noun)

trade that is in violation of restrictions, rationing or price controls

Related Terms

Examples of black market in the following topics:

  • Price Ceiling Impact on Market Outcome

    • A price ceiling will only impact the market if the ceiling is set below the free-market equilibrium price.
    • Prolonged shortages caused by price ceilings can create black markets for that good.
    • A black market is an underground network of producers that will sell consumers as much of a controlled good as they want, but at a price higher than the price ceiling.
    • Black markets are generally illegal.
    • If a price ceiling is set below the free-market equilibrium price (as shown where the supply and demand curves intersect), the result will be a shortage of the good in the market.

  • Fixed Exchange Rates

    • Capital controls are residency-based measures such as transaction taxes, other limits, or outright prohibitions that a nation's government can use to regulate flows from capital markets into and out of the country's capital account.
    • Typically a government maintains a fixed exchange rate by either buying or selling its own currency on the open market.
    • If the exchange rate drifts too far below the desired rate, the government buys its own currency in the market using its reserves.
    • This places greater demand on the market and pushes up the price of the currency.
    • This method is rarely used because it is difficult to enforce and often leads to a black market in foreign currency.

  • Private Property Rights

    • Private property rights have three important characteristics that contribute to the efficient functioning of the market; exclusivity, enforceability and transferability.
    • A lack of any one of these characteristics will distort market exchanges and result in less than optimal results.
    • learly a good must have property rights that can be transferable before it can be exchanged in a market.
    • In cases where it is technically possible to transfer a property right but illegal, a "black market" may emerge.

  • "Black Monday" and the Long Bull Market

    • On Monday, October 19, 1987, the value of stocks plummeted on markets around the world.
    • The Dow Jones Industrial Average fell 22 percent to close at 1738.42, the largest one-day decline since 1914, eclipsing even the famous October 1929 market crash.
    • In late 1998, one change required program-trading curbs whenever the DJIA rose or fell 2 percent in one day from a certain average recent close; in late 1999, this formula meant that program trading would be halted by a market change of about 210 points.
    • Partly as a result, the crash of 1987 was quickly erased as the market surged to new highs.
    • But by then, the market had climbed so high that the declines amounted to only about 7 percent of the overall value of stocks, and investors stayed in the market, which quickly rebounded.

  • Introduction to Firms with "Market Power"

    • The existence of market power is tied to the demand conditions the firm faces.
    • In pure competition, the firms may all try to influence market demand (eat Colorado Beef, Eat Black Angus Beef, Drink Florida orange juice, etc) but individual producers do not advertise their own product (Eat Rancher Jones's Beef).
    • Many agricultural markets are close to pure competition.
    • Monopoly is the market structure that is usually associated with the greatest market power.
    • Firms in monopolistic competition or imperfectly competitive markets are more likely to have limited market power because there are many firms with differentiated products (there are substitutes) and there is relative ease of entry and exit into the market.

  • Causes of Banking Crises

    • Banking crises can be caused by inadequate governmental oversight, bank runs, positive feedback loops in the market and contagion.
    • In light of recent market and banking failures, the economic analysis of banking crises both historically and presently is a constant source of interest and speculation.
    • Stock Market Positive Feedback Loops: One particularly interesting cause of banking disasters is a similar positive feedback loop effect in the stock markets, which was a much more dynamic factor in more recent banking crises (i.e. 2007-2009 sub-prime mortgage disaster).
    • John Maynard Keynes once compared financial markets to a beauty contest, where investors are merely trying to pick what is attractive to other investors.
    • The Great Depression highlights how bank runs caused a banking crisis, which ultimately became a global economic crisis.The Great Depression in 1929 resulted from a variety of complex inputs, but the turning point came in the form of a mass stock market crash (Black Tuesday) and subsequent bank runs.

  • Aggregate Expenditure at Economic Equilibrium

    • This belief is parallel to Adam Smith's invisible hand - markets achieve equilibrium through the market forces that impact economic activity.
    • The equilibrium point is where the blue line intersects with the black line.

  • Market Supply

    • Market supply is the summation of the individual supply curves within a specific market where the market is characterized as being perfectly competitive.
    • Market supply is the summation of the individual supply curves within a specific market.
    • In combination with market demand, the market supply curve is requisite for determining the market equilibrium price and quantity.
    • " If a firm has market power, its decision of how much output to provide to the market influences the market price, then the firm is not "faced with" any price, and the question is meaningless.
    • Therefore, production in the market is a sliding scale dependent on price.

  • The Demand Curve in Perfect Competition

    • In a perfectly competitive market the market demand curve is a downward sloping line, reflecting the fact that as the price of an ordinary good increases, the quantity demanded of that good decreases.
    • Price is determined by the intersection of market demand and market supply; individual firms do not have any influence on the market price in perfect competition.
    • Once the market price has been determined by market supply and demand forces, individual firms become price takers.
    • The demand curve for a firm in a perfectly competitive market varies significantly from that of the entire market.The market demand curve slopes downward, while the perfectly competitive firm's demand curve is a horizontal line equal to the equilibrium price of the entire market.
    • The market demand curve is downward-sloping.

  • The Role of the Financial System

    • A financial market or system is a market in which people and entities can trade financial securities, commodities, and other fungible items.
    • A financial market or system is a market in which people and entities can trade financial securities, commodities, and other fungible items .
    • There are both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded).
    • Financial markets are associated with the accelerated growth of an economy.
    • Equity markets are the most closely followed of the financial markets.