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If the country is in a recession, using a supply demand diagram show what will happen...

If the country is in a recession, using a supply demand diagram show what will happen to prices and quantities in the yacht market in comparison with the market for gasoline.

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Answer #1

Ans) Demand for yacht is elastic, as it is a luxury good. While demand for Gasoline is inelastic, as it is necessity.

Therefore, demand curve for yacht will be flatter and that of Gasoline will be steeper.

Due to recession, income of people will decrease. As a result, demand will decrease and demand curve will shift to the left.

This decrease in demand will have more impact on price and quantity in yacht market than in gasoline market.

The above graph shows that change in price and quantity is more in yacht market than in Gasoline market.

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