What is a grey market?
- The trade of a commodity which is unbranded
- The trade of a commodity which is recognized as a counterfeit product
- The trade of a commodity for which the country of origin is not mentioned
- The trade of a commodity for which the taxes are evaded
- The trade of a commodity through distribution channels not authorized by the manufacturer
The Correct Option is
Approach Solution - 1
A grey market refers to the trade of a commodity through distribution channels that are not authorized by the manufacturer. This type of market occurs when unauthorized dealers buy products in one market (often at lower prices) and sell them in another, bypassing the official channels.
Here is a step-by-step explanation of why the correct option is: "The trade of a commodity through distribution channels not authorized by the manufacturer":
- Understanding the Concept: The grey market is sometimes confused with the black market, which involves illegal trade. However, the grey market does not necessarily involve illegal products. Instead, it involves legal products but through unauthorized channels.
- Characteristics of Grey Market:
- Products sold are genuine but are not distributed under the sanction of the manufacturer.
- This could involve parallel imports, where products intended for sale in one market are imported and sold in another market.
- Eliminating Incorrect Options:
- Unbranded Commodities: The grey market is not defined by the branding of the products but by the channel used for distribution.
- Counterfeit Products: Counterfeit products belong to the illegal black market, not the grey market.
- Country of Origin: The specification or absence of the country of origin does not define the grey market.
- Tax Evasion: Tax evasion involves illegal trade practices and is distinct from the grey market.
The grey market can impact the prices and availability of products and may affect the profit margins of authorized dealers and manufacturers. Understanding the dynamics of the grey market is crucial for regulators, businesses, and consumers.
Approach Solution -2
A grey market refers to the trade of a commodity through distribution channels that are not authorized by the manufacturer. This often occurs when products are purchased in one market, where they may be priced lower, and then sold in a higher-priced market without the consent of the manufacturer. Grey markets can lead to various issues such as warranty conflicts, lack of post-sale services, and complications related to product authenticity. They are legal but exist outside the sanctioned distribution network, differing from counterfeit goods which are illegal replicas of products.
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