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.

What is the formula for elasticity of savings with respect to interest rates?

We have discovered that the welfare system discourages recipients from working because the more income they earn, the less welfare benefits they receive. How does the earned income tax credit attempt to loosen the poverty trap?