Dale R.

Tinao
Managerial Economics {MW 8:30 – 10:00}
Questions:

1. Is the demand for luxury cars elastic or inelastic? Explain and illustrate.
- The demand for luxury cars is elastic because when a heavy tax was imposed on the
luxury cars, we can see a 30% decline in the sales of luxury cars. The elasticity of
demand for these vehicles is demonstrated by the market's responsiveness to the tax
increase.

2.

What factors influence this elasticity?

- The increase in tax has influenced the elasticity of demand
- The determinants that has influenced the elasticity are Substitutability, Proportion of
Income, Luxuries vs. Necessities

3. Is specific tax a better alternative to raise tax revenue? Explain.

- It will be more convenient for middle-class buyers to consider tax rates and select a car
that will be in line with their budget since I believe that a specific tax is a good alternative
because it is uniform and fixed, and taxes will still generate the government with revenues.