The 1990 “yacht tax” caused a large deadweight loss, because demand for luxury yachts made in the United State?
The 1990 “yacht tax” caused a large deadweight loss, because demand for luxury yachts made in the United States is _______.
very elastic
very inelastic
perfectly inelastic since “rich” people will pay whatever is necessary
perfectly elastic
Tags: Deadweight Loss, Luxury Yachts, State Tax, United State, United States, Yacht
Read this and then answer your economics homework on your own.
very eleastic. No one “needs” a luxury yacht.
Raising the “luxury” tax on the yacht did not raise the expected funds, instead it destroyed the boat manufacturing industry.
More important, perhaps, which your teacher might not cover, is that, if a tax is perceived as “unfair” like this one was, people will avoid it if they can.