a) Cross-Price elasticity of demand:

The city of Madison eliminated parking meters and made all street parking downtown free. Lowering the price from $2 per hour to $0 per hour, after doing so, it found that the number of people driving into town increased by 30%. What is the cross-price elasticity of demand for in Madison?

b) Income elasticity of demand:

Consider a haute couture clothing market, write down the formula of income elasticity of demand, what characteristics do you expect in terms of sign and magnitude of the elasticity value?