One reason the luxury tax on yachts imposed by the U.S.Congress in 1991 failed to produce much tax revenue was that the demand for yachts was elastic.

Question

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When the demand for a good is elastic, an increase in price leads to a proportionally larger decrease in quantity demanded. In the case of the luxury tax on yachts, many buyers were sensitive to the higher price and either delayed their purchase or bought yachts from foreign countries where they could avoid the luxury tax. This resulted in lower overall sales and thus lower tax revenue than expected.

One Reason the Luxury Tax on Yachts Imposed by the U.S.Congress