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

This entry was posted on Saturday, July 11th, 2009 at 3:56 pm and is filed under Taxes on Yachts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

2 Responses to “The 1990 “yacht tax” caused a large deadweight loss, because demand for luxury yachts made in the United State?”

Truth B Says: July 12th, 2009 at 7:13 am

Read this and then answer your economics homework on your own.
Chuckie O Says: July 13th, 2009 at 6:02 pm

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.