Answer to Question #124445 in Microeconomics for Tigist

Question

Keeping other things constant, why it would be better o penalize the buyers
rather than the sellers in the black market. What light can the supply and
demand analysis throw on the phenomenon of the black market?

Answer 1

It would be better to penalize the buyers since they are the ones promoting the black market business by purchasing the commodities that are illegal and after they realise they have been defrauded or scammed they begin complaining to the authorities and initially they had a perfect knowledge that black markets exist.

The higher the price, the more suppliers are likely to produce.Supply is considered to increase as the price of commodities rises, and suppliers are willing to produce more. Demand is generally considered to decrease at high prices , consumers buy less.