Citizens in the land of Notax (a country in another parallel universe!) Are non-taxpayers (never paying income tax), facing a wage rate in that country of NOX 10 / hour. In addition, residents of Notax also do not receive any transfer of income from their government and are free to determine the working hours they wish to allocate in the labor market. It is assumed that residents of Notax have different preferences as well as preferences for their consumption and leisure. The regime in power in Notax is considering submitting a proposal to parliament entitled "Taxes and Expenditures" (Pakja).
With Pakja a system applies where the community will be subject to an income tax of 20% for every NOX wage received by workers. At the same time there is also a system whereby the government will provide a transfer to each resident of NOX 100 as real non-wage income.
(NOX is the currency unit code name of the Notax country. The NOX exchange rate against the dollar is irrelevant in this case because they are in different universes, so there is no need to compare with the purchasing power of American citizens.)
Question:
Describe the
Step by step
Solved in 4 steps with 7 images
