Representative consumer faces a wage income tax, Microeconomics

suppose, as in the federal income tax code for the united states, that the representative consumer faces a wage income tax with a standard deduction. That is the representative consumer pays no tax on wage income for the first x units of real wage income, and then pays a proportional tax t on each unit of real wage income greater than x.

Therefore, the consumer's budget constraint is given by c=w(h-1 + (Pie) if w(h-1)< x, or c=(1-t)w(h-1)+tx+(pie) if w(h-1)≥x. now, suppose that the government reduces the tax deduction x. using diagrams, determine the effects of this tax change on the consumer and explain your results in terms of income and substitution effects. Make sure that you consider two cases. in the first case the consumer does not pay any tax before is x reduced, and in the second case the consumer pays a positive tax before x is reduced.

 

Posted Date: 3/21/2013 5:15:49 AM | Location : United States







Related Discussions:- Representative consumer faces a wage income tax, Assignment Help, Ask Question on Representative consumer faces a wage income tax, Get Answer, Expert's Help, Representative consumer faces a wage income tax Discussions

Write discussion on Representative consumer faces a wage income tax
Your posts are moderated
Related Questions
Q. Explain about Banking Cycle? An economic cycle that results from cyclical changes in the attitudes of banks toward lending risk. When economic times are good, bankers become

the demand and supply functions for goods are given by demand:Pd=50-3Qds and supply:Ps=14=1.5Qs. where p is the price of a pair of jeans, Q is the number of pairs of jeans a) calc

Marginal revenue: Marginal revenue is the change in total revenue with respect to a change in quantity sold. That is, it is the change in total revenue that results from the s

Nations trade what they produce in excess of their own consumption to:

Why is it unusual for yields on longer term notes to be lower than yields on shorter term notes? 2pts b) Why would any investor buy the 2 year note (instead of the 1 year) given it

Member's Quota in IMF  Quota represents the subscription by a member country to the capital fund of the IMF. Quotas are fixed for each country, taking into account such factor

Consumer Choice   * Consumers choose a combination of goods which will maximize satisfaction they can attain, given the some degree of budget available to them. * The maximiz

when does a buisness reach shutdown point


The production function for a firm is expressed as follows: Q = 800K - K 2 +5KL - 7750L + 10,000 Where Q is quantity of units manufactured, K and L are units of capital and