Under a binding price ceiling, a black market commonly appears when buyers cannot obtain enough of the good legally.
A price ceiling set below the market-clearing level can create a shortage: buyers want more than sellers are willing to provide at the legal price. Some transactions may then move outside official channels, where sellers charge illegal prices or use other forms of exchange.
Black-market activity is not inevitable in every shortage. Enforcement, monitoring, penalties, product characteristics, and the availability of substitutes affect whether unofficial trade develops. Rationing, favoritism, waiting, and reduced product quality can also emerge.
A black market is different from a legal secondary market. Its defining feature is that the production, sale, purchase, or exchange violates applicable law, rather than simply occurring away from the original seller.