Between 2014 and 2015, the quantity of cars produced and sold decreased by 20%. During the same period, the price of cars increased by 5% and the cost of gasoline increased by 20%. We know that the cross elasticity of demand of gasoline is -0.3.
a) Compute the impact of the gasoline price increase on the demand for cars.
b) Compute the price elasticity of demand for cars during this period.