Goods and services that are controlled or forbidden by governments but continue to be bought and sold privately are said to be traded on the black market. Illegal drugs, pornography and some forms of gambling are classic examples of goods and services that trade on the black market. Black markets tend to thrive in highly controlled economies where governments ration many products such as food, gas and luxury goods.
Goods in the black market do not trade in open view of the authorities. When products are banned, they can be smuggled or produced illegally, yielding profits based on demand. Legal goods and services are sometimes traded on the black market to avoid taxes.
Black market transactions are potentially disruptive to society. When they occur in goods and services that have been legally banned, the black market undermines the ban. When black market transactions occur in markets for legal goods and services in order to avoid taxes or regulations, they put legitimate businesses at a disadvantage. Moreover, governments must levy higher taxes to compensate for the lost revenue.