1 Taxes and consumption - leisure choice (Ch. 21) Suppose that you can earn $20 per hour before taxes and can work up to 168 hours per week. Consider two income tax rates, 5% and 10%. a. On the same diagram, sketch the two weekly consumption - leisure budget constraints reflecting the two different tax rates. b. Sketch a set of representative indifference curves such that the income effect of the tax increase outweighs the substitution effect. c. Draw a set of representative indifference curves such that the substitution effect of the tax increase outweighs the income effect. Taxes and consumption-leisure choice (Ch. 21) Suppose that you can earn $20 per hour before taxes and can work up to 168 hours per week. Consider two income tax rates, 5% and 10%. a. On the same diagram, sketch the two weekly consumption-leisure budget constraints reflecting the two different tax rates. b. Sketch a set of representative indifference curves such that the income effect of the tax increase outweighs the substitution effect. c. Draw a set of representative indifference curves such that the substitution effect of the tax increase outweighs the income effect.

1 Taxes and consumption - leisure choice (Ch. 21) Suppose that you can earn $20 per hour before taxes and can work up to 168 hours per week. Consider two income tax rates, 5% and 10%. a. On the same diagram, sketch the two weekly consumption - leisure budget constraints reflecting the two different tax rates. b. Sketch a set of representative indifference curves such that the income effect of the tax increase outweighs the substitution effect. c. Draw a set of representative indifference curves such that the substitution effect of the tax increase outweighs the income effect. Taxes and consumption-leisure choice (Ch. 21) Suppose that you can earn $20 per hour before taxes and can work up to 168 hours per week. Consider two income tax rates, 5% and 10%. a. On the same diagram, sketch the two weekly consumption-leisure budget constraints reflecting the two different tax rates. b. Sketch a set of representative indifference curves such that the income effect of the tax increase outweighs the substitution effect. c. Draw a set of representative indifference curves such that the substitution effect of the tax increase outweighs the income effect.

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter15: Income Inequality And Poverty

Section: Chapter Questions

Problem 9CQ

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22. Taro's utility function is U(C, R) = 32√√R+C, where R is the amount of leisure. He has 16 hours a day to divide between work and leisure. He gets $10 an hour no matter how many hours he works, but must pay a 20% tax on his labor income. He has also an income of $40 from non-labor income source. How many hours will he choose to work? A) 4 B) 8 C) 10 D) 12 E) 16
4. The Laffer curve Government imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for champagne, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. BRUNENSE 8 5 1000 Suppose the government imposes a $10-per-case tax on suppliers. At this tax amount, the equilibrium quantity of champagne is - 700 400 500 430 300 200 100 1000 Now calculate the government's tax revenue if it sets a tax of $0, $10, $20, $25, $30, $40, or $50 per case. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity"field until the Tax equals the value of the per-unit tax.) Using the data you generate, plot a…
4. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for cigarettes, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per pack) 20 18 16 14 Supply Demand 0 20 40 60 80 100 120 140 160 180 200 QUANTITY (Packs) Suppose the government imposes a $4-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is Graph Input Tool Market for Cigarettes Quantity (Packs) Demand Price (Dollars per pack) Tax (Dollars per pack) 80 12.00 4.00 Supply Price (Dollars per pack) packs, and the government collects $ (?) 8.00 in tax revenue.
Suppose Shabna has a fixed income and she can consume only two goods and they are bread and butter. Suppose the government has imposed a tax on butter, how this will impact her consumption bundle. Support your answer with proper graph(s) showing equivalent variation and the government's tax revenue. Also, explain your understanding of equivalent variation.
macro question 6
1-a Answer following questions by using the Cobb-Douglas utility function u= xx and assuming that the price of good 1 is pi and good 2 is p2. Assume 00, p2>0, and income I>0.
4. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for gin, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Market for Gin 100 I Quantity (Bottles Demand Price (Dollars per bottle) 90 Supply 56 80 Şupply Price (Dollars per bottle) 60.00 40.00 70 Tax Dollars per bottle) 20.00 * 60 50 40 30 Demand 20 10 0 14 28 42 56 70 84 98 112 126 140 QUANTITY (Bottles) Suppose the government imposes a $20-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of gin is bottles, and the government collects S in tax revenue. Now calculate the…
4. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for gin, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per bottle) 100 90 80 20 10 0 0 Supply Demand 14 28 42 56 70 84 98 112 126 140 QUANTITY (Bottles) Graph Input Tool At this tax amount, the equilibrium quantity of gin is Market for Gin Suppose the government imposes a $20-per-bottle tax on suppliers. Quantity (Bottles) Demand Price (Dollars per bottle) Tax (Dollars per bottle) 56 60.00 20.00 Supply Price (Dollars per bottle) bottles, and the government collects $ ? 40.00 in tax revenue.
6 Economic Exercise 1.1
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17 - Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $2.00 and the price of a banana is $1.00. If the consumer spent all of her budget on just apples or just bananas, how many apples or bananas maximum would she be able to buy?