When a product is made illegal by the government, a black market for the product usually appears. But how does supply and demand change as goods move from a legitimate market to a black market? A simple supply and demand map can prove helpful in visualizing this situation. Let’s see how the black market affects typical supply and demand charts and what this means for consumers. To understand what happens when a commodity is illegal, first of all, what is the supply and demand situation of the commodity in the days before the black market. To do this, draw a downward-sloping demand curve (shown in blue) and an upward-tilted supply curve (shown in red), as shown in this figure. Note that the price is on the X-axis and the number is on the Y-axis. The intersection between the two curves is the natural market price when the goods are legal. When the government makes the product illegal, a black market will follow. When the government manufactures illegal products (such as marijuana), two things often happen. First, supply has fallen sharply because fines for selling goods have led people to switch to other industries. Second, the decline in demand was observed to prohibit certain consumers from wanting to buy it. A drop in supply means that the upwardly inclined supply curve will move to the left. Similarly, a drop in demand means that the downwardly inclined demand curve will move to the left. Usually, when the government creates a black market, supply side effects dominate the demand side. This means that the change in the supply curve is greater than the change in the demand curve. This figure shows the new dark blue demand curve and the new dark red supply curve in this figure. Now, take a look at the new points where the new supply and demand curve intersect. Changes in supply and demand led to a reduction in black market consumption and higher prices. If demand side effects dominate, consumption will fall, but prices will fall accordingly. However, this usually does not happen in the black market. Instead, prices usually rise. The amount of price change and the change in consumption will depend on the magnitude of the curve change, as well as the price elasticity of demand and the price elasticity of supply.