Why does a rationing system often result in the formation of black markets?

• A. Because rationing increases the supply of goods, making them more widely available.
• B. Because rationing creates shortages, leading people to seek goods outside official channels.
• C. Because rationing systems always set prices above equilibrium, causing surpluses.
• D. Because rationing eliminates the need for prices, so goods are distributed freely.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand what a rationing system is — it is a method used to control the distribution of scarce goods by limiting the amount each person can buy, often through fixed quotas or restrictions.
2. Step 2: Recognize that rationing typically sets a maximum quantity or fixed price below the market equilibrium, which can lead to demand exceeding supply, creating shortages.
3. Step 3: Analyze the consequences of these shortages — when official channels cannot satisfy consumer demand, some consumers may turn to unofficial or illegal markets to obtain the goods they want.
4. Step 4: Define a black market as an illegal market where goods are sold outside government controls, often at higher prices due to scarcity in the official market.
5. Step 5: Conclude that rationing causes shortages, which incentivizes the formation of black markets as people seek to bypass official restrictions and obtain goods through alternative means.