Representative consumer faces a wage income tax, Microeconomics

Assignment Help:

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.

 


Related Discussions:- Representative consumer faces a wage income tax

Production possibility curve, construct your own version of a production po...

construct your own version of a production possibility curve and use it to explain scarcity, opportunity cost and choice

Fiat money in europe , Fiat money is not a new idea.  Some European histori...

Fiat money is not a new idea.  Some European historians recognize the first use of fiat money in Europe resulting from gold and silver smiths issuing their customers receipts for g

Utility functions, can you help me answer an economics question

can you help me answer an economics question

Profit maximization, critically analysis firm theory of profit maximization...

critically analysis firm theory of profit maximization?

Trade and economic growth , TRADE AND ECONOMIC GROWTH : Foreign trade ...

TRADE AND ECONOMIC GROWTH : Foreign trade has worked as an 'engine of growth' in the past (witness Great Britain in the 19th century and Japan in the 20th, besides others), an

Stock market, Stock Market: A place where shares of joint stock corporation...

Stock Market: A place where shares of joint stock corporations are sold andbought. Most modern stock markets no longer have a physical presencehowever rather connected computer net

Linear break even analysis, what do you understand by linear break-even poi...

what do you understand by linear break-even point? in what way is it useful in managerial economics? what are the assumptions underlying the analysis?

Sources of finance to business enterprises, explanation of sources of finan...

explanation of sources of finance to business enterprises in Nigeria

Competitive short run supply curve of firm and industry, A Competitive Shor...

A Competitive Short Run Supply Curve of Firm * Observations: - P = MR - MR = MC - P = MC * Supply is amount of output for every possible price.  Thus: -  If

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd