(a) Using a supply and demand diagram show the market for housing in equilibrium, where demand is less elastic than supply. On your diagram label the respective consumer and producer surpluses. Is this market Pareto efficient? Why or why not?

(b) Assume that the State Government imposes a per unit tax on the sellers of houses. Draw a new diagram showing the imposition of this tax on the market for housing. Does the imposition of this tax cause a Pareto improvement in the market? Explain.

(c) Does the tax imposed in part (b) create a larger burden on producers or consumers, or do they share the burden of the tax in equal proportion? Justify your answer with reference to your diagram in part (b).