3. Consider the following supply and demand function, QD = 65 - 2P
and Qs = 1.5P - 5, and assume a $17.50 excise tax is collected from
consumers.
(a) Calculate price and quantity in this market before (P₁ and Q₁)
and after the tax (P2 and Q2).
(b) What is the amount of tax revenue that is collected from con-
sumers, producers and in total?
(c) What is the relative tax burden of consumers and producers?
(d) Show how the elasticity of supply and demand determine the shar-
ing of the tax burden.
(e) What is the relative tax burden of producers and consumers if the
tax is collected from producers, instead?