If the price of a luxury car increases by 10% and the quantity demanded decreases by 20%, how would you classify the demand for luxury cars?

The situation describes how consumers react to a change in the price of luxury cars. When the price increases by 10% and the quantity demanded decreases by 20%, we can see that the change in quantity is greater than the change in price. This means that consumers are quite sensitive to price changes for luxury cars, which indicates that the demand is elastic. For example, if a luxury car originally costs $100,000, a 10% increase raises the price to $110,000, and if only 80 cars are sold instead of 100, this shows that people are less willing to buy them at the higher price. In summary, the demand for luxury cars is elastic because the quantity demanded changes significantly in response to price changes.