Final answer:
Black markets are common in countries that attempt to institute price controls because these controls create shortages and distort the supply and demand of goods.
Step-by-step explanation:
Black markets are common in countries that attempt to institute price controls because these controls create shortages and distort the supply and demand of goods. When the government sets prices artificially low, it often leads to an excess demand for those goods. This creates an incentive for individuals to sell the goods in the black market at higher prices, where supply and demand can reach equilibrium.
For example, let's say the government sets the price of a certain product below its market value. This price control will lead to a high demand for the product, but since it is being sold at a lower price, suppliers may reduce their production or refuse to sell it in the legal market. As a result, individuals who can acquire the product through legal means may choose to sell it in the black market at a higher price to capitalize on the excess demand.
In countries where there is a lack of trust in the government's ability to manage the economy effectively, people may prefer to engage in black market transactions rather than relying on price controls. By doing so, they can bypass government regulations, avoid shortages, and access goods at market prices.