please show work and explain.

2. (10 points) Car Permits: Suppose the town of Blacksburg decides to limit the number of private cars to its present level. It is done by issuing to each existing car a permit without which a car will not be allowed to operate on the road. Let's say there are 1000 cars right now, so 1000 permits are issued. This quota permit is freely traded in the market. In order to drive a new car on the road, therefore, it is necessary to obtain a quota permit in the market. Assuming the demand for private cars in Blacksburg is rising, what will the effects of such quota system be upon a) the intensity of car use and b) the average quality of cars on the roads