If a good is subject to a binding price floor and someone purchases it on the black market,what would he or she expect to happen to the price over time?
A) The black market price will rise over time as the supply curve becomes more elastic and the demand curve becomes more inelastic.
B) The black market price will fall over time as both the supply and demand curves become more inelastic.
C) The black market price will rise over time as the demand curve becomes more elastic and the supply curve becomes more inelastic.
D) The black market price will fall over time as both the supply and demand curves become more elastic.
E) The black market price will not change over time.

Question

Quizplus · Accepted Answer

The black market price is likely to fall over time as both supply and demand become more elastic. This is because, in the black market, restrictions on the price floor are bypassed, allowing prices to adjust more freely to market conditions. As sellers and buyers adjust and become more aware of the black market opportunities, supply can increase and demand can become more responsive, leading to a potential decrease in prices.

If a Good Is Subject to a Binding Price Floor