Question

What leads to rationing and black marketing under perfect competition?

Answer 1

Rationing and control prices come under price control.

Rationing is a system of distribution of necessary commodities in limited quantities at controlled prices. This is practiced when the commodity is short and not easily available in reasonable price.

Black market is also one of the outcomes of price control. This is practiced when the commodity is sold at a very high price, price that is higher than the government fixed price. The reason being that producers are reluctant to sell at low prices and some consumers who are in dire need of the commodity are ready to pay a hefty price in order to consume it.

In reality, it is difficult to prevent black marketing when government controlled price is lower than the market equilibrium price.