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

Amalgamation, explain the following disadvantages of amalgamation. Complex ...

explain the following disadvantages of amalgamation. Complex nature

Property concepts , Normal 0 false false false EN-IN ...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Market failure, causes of market failure and its solutions?

causes of market failure and its solutions?

Consumer equlibrium, have to do a group project on consumer equlibrium. plz...

have to do a group project on consumer equlibrium. plz help on wat sub topics to select (i am in college 1st year)

Economic growth and economic development, Economic growth and Economic deve...

Economic growth and Economic development: Economic Growth refers to an increase in real aggregate output (real GDP) reflected in increased real per capita income.A country is

Need Econ Help, Two firms produce a pollutant called Q. The total costs of...

Two firms produce a pollutant called Q. The total costs of reducing emissions of Q are as follows for Firm 1 and Firm 2, respectively: TC1=10+100Q12 TC2=20 + 50Q22. This means tha

Strategic importance of supply chain management, Strategic Importance of Su...

Strategic Importance of Supply Chain Management This describes the scope of supply chain management (SCM), including the management of procurement, logistics and materials. It

Optimal Production Quantity, Wholemark is an Internet order business that s...

Wholemark is an Internet order business that sells one popular New Year greeting card once a year. The cost of the paper on which the card is printed is $0.50 per card, and the cos

Paramagnetism, chemistry assignments ,  Some normally nonmagnetic substance...

chemistry assignments ,  Some normally nonmagnetic substances are attracted by a magnetic field and studies of these "paramagnetic" substances give information about the number of

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