Answer
Price paid by consumer for the luxury car will rise less than $500.
Work Step by Step
The demand for a luxury good is price elastic (PED>1). This means that demand for a luxury good changes more than proportionally with a change in price.
With the understanding that consumer will bear a lower tax incidence for a good that is more price elastic, the luxury car producer will bear a heavier burden of the tax in the form of lower profits. This is because if the price of the luxury car were to increase, it will lead to a more than proportionate fall in quantity demanded for the luxury car, resulting in a even larger fall of profits.
Therefore, consumer will bear a smaller portion of the $500 tax.
