Microeconomics

Topic
In some countries prices are determined by the government rather than market forces. In these countries there are usually underground or black markets where illegal transactions take place at higher prices than the government controlled price ceiling. In economies where prices are determined by market forces, underground markets are seldom observed.
1. Why are there market extensive underground markets in economies with government controlled prices but not in economies with market determined prices?
2. Briefly include how the market determines prices; if a price is higher or lower than it “should” be, what happens and why? Why does voluntary exchange (buying and selling) occur at higher than legal prices on the underground market? (A graph might help to explain your paper).
Don’t confuse the term demand/ quantity demanded and supply/quantity supply
Grading
Papers will come back with two score:
1. The first is for the economics.
2. The second for the presentation.
Each score may range from 0 to 4.0. Paper may have the following marks
? Good point, right idea.
? Idea is not quite right.
? Get rid of this letter/word.
? Your idea isn’t clear.
sp Word is misspelled.
/ A paper is needed here.
Switch the order of these words.

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