Identify the determinants of demand on cars in this case study and state whether they

are shifting demand left or right. (3 determinants). Show the effect on the car market

using a labelled graph.

2.

The Motor Transport Authority (MTA) expects that new car sales will decrease from

48,500 cars in December to 46,950 cars in January due to 5% Value Added Tax (VAT)

in 2018, which will be completely passed on to consumers. Calculate PED, state

whether it is elastic or inelastic, and, state what manufacturers and dealers should do

to maximize revenue.

(4 marks total - 2 x 2 marks)

3.

If household income in the GCC has decreased 18% over the past year, and new car

sales in the region have decreased from 1.1 million to 875,000. Does this indicate that

cars are normal or inferior goods? Show your calculations.