Standard Supply and Demand Diagram Mathematics & Economics Case Study
You work as a stock analyst. You specialize in analizing markets for "high end" manufactured products. The President has recommended that Congress impose a tax of $20,000 on every person who purchases a new yacht. He argues that rich people who can afford to purchase yachts (they cost around $2,000,000 each) should pay higher taxes. The money raised would be used to provide additional benefits to returning war veterans.
You are writing a research report on the firms that manufacture yachts. You want to include a statement in the report about whether you think the proposal is likely to pass Congress and become law. You have analized the proposal and the voting records of members of Congress. You have decided that the proposal will not obtain enough votes to pass Congress, unless the major labor unions representing employees in this industry support it. You know that many of the yacht-producing firms hire veterans who could benefit from the programs funded by the tax.
1. Draw a standard supply and demand diagram depicting the market for yachts prior to the tax.
2. Analyze the effects of Imposing a $25,000 per yacht tax on consumers (on a qualitative basis).
3. Based om this analysis, do you think that the labor unions will support the proposed tax? Explain. What does it depend on?
Case Study
Name
Course
Instructor
Date
Standard supply and demand diagram on the market for yachts before
Price
002857520955004762539052528575504825285759239251238250952500
Supply
P*
Demand
Q*
Quantity of yachts
The law of supply and demand highlights that the equilibrium price and quantity are based interaction between the suppliers (producers) and the consumers and reflects the relationship that exists between the quantity offered of a good and its demand in the market.
The effects of imposing a $25,000 per yacht tax on consumers
Imposing a $25,000 per yacht tax on consumers will result in the consumers paying higher prices because the yacht-producing firms push the costs to the consumers. The yacht-producing firms and employees wi...
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