parallel markets are usually the results of

Step 1: Analyze the question The question asks what usually causes parallel markets. A parallel market (also called a black market) is an illegal or unofficial market where goods are sold outside the official channels, often at prices different from the official ones.

Step 2: Explain the concept Governments sometimes use price legislation, which means setting legal price controls:

• Price ceiling (maximum price): a legal limit set below the equilibrium price to protect consumers, for example on petrol, rice or drugs.
• Price floor (minimum price): a legal limit set above the equilibrium price to protect producers, for example on farm produce.

When a price ceiling is set below the equilibrium price, quantity demanded becomes greater than quantity supplied, so there is a shortage. Many buyers cannot get the goods at the official price. Some sellers then sell secretly at higher prices, and this creates the parallel (black) market.

Step 3: Evaluate the options

• A. Excess supply: This causes prices to fall and goods to pile up. It does not create a parallel market. Wrong.
• B. Activities of rich individuals: This is not an economic cause of parallel markets. Wrong.
• C. Price legislation: Price controls create shortages, and shortages lead to parallel markets. Correct.
• D. Inadequate information: This may cause poor decisions by buyers and sellers, but it is not the usual cause of parallel markets. Wrong.

Step 4: Answer The correct option is C. price legislation.

Exam tip: Link the words together: price control → shortage → black/parallel market. If you see "parallel market" or "black market" in an exam, think of government price ceilings and shortages.