Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 19, Problem 2.4P
(a)
To determine
Calculate the value of per-unit payroll tax.
(b)
To determine
Calculate the value of per unit price of labor faced by the firms after the imposition of tax.
(c)
To determine
Calculate the value of wage rate of workers after the imposition of tax.
(d)
To determine
Identify the labor
(e)
To determine
Identify the new equilibrium wage rate.
(f)
To determine
Calculate the values of total tax collection and excess burden on employers after the imposition of tax.
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Suppose a tax on wages is passed to finance a government program. The legislation orders a tax of 12.4% on per hour wage earnings with 6.2% to be paid by employers and 6.2% to be paid by workers. Assume labor supply is more inelastic than labor demand. Under these assumptions, describe the economic burden of the tax?
a.The economic burden will be fully on workers.
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Chapter 19 Solutions
Principles of Economics (12th Edition)
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- instructure.com/courses/11047/quizzes/121411/take The following graph depicts a market where a tax has been imposed. Pe was the equilibrium price before the tax was imposed, and Qe was the equilibrium quantity. After the tax, Pc is the price that consumers pay, and Ps is the price that producers receive. Qr units are sold after the tax is imposed. NOTE: The areas B and C are rectangles that are divided by the supply curve ST. Include both sections of those rectangles when choosing your answers. nº P₁ " A A B M C Q₁ Which areas represent consumer surplus before the tax is imposed? C+G+E B-C Q₂arrow_forwardConsider the labor market. Suppose that the supply of labor is = 2 + H/2 and the demand for W=52−2H. Where W is wage and is hours worked. Now suppose that the government levies a $5 per hour payroll tax on buyers of labor (firms). Determine the worker (supplier) and firm (buyer) tax burdens. Determine the deadweight loss associated with this payroll tax.arrow_forwardIn an unregulated, competitive market we could calculate consumer surplus if we knew the equations representing supply and demand. For this problem assume that supply and demand are as follows: Supply P = 4 + 0.116Q Demand P = 25 - 0.10Q where P represents unit price in dollars and Q represents the number of units sold each year. Calculate the annual value of aggregate consumer surplus.arrow_forward
- Only typed solutionarrow_forwardWho should pay the tax? The following graph gives the labor market for laboratory aides in the imaginary country of Paideia. The equilibrium hourly wage is $10 , and the equilibrium number of laboratory aides is 150 . Suppose the federal government of Paideia has decided to institute an hourly payroll tax of $4 on laboratory aides and wants to determine whether the tax should be levied on the workers, the employers, or both (in such a way that hay the tax is collected from each party). Use the graph input tool to evaluate these thret proposal5; Entering a number into the Tax Levied on Employers feld (inibialy set at adro dallars per hour) shilts the demand curve down by the amount you enter, and entering a number into the Tax Leviod on workers fieid (initially set at acro dollas per bour) shifts the supply curve up by the amount your enter. To determine the before-tax wage for each tar proposal, adjust the amcunt in the wage field unbil the quantity of labor supplied…arrow_forwardOn a graph of the labor market, show the effects of an increase in the payroll tax.arrow_forward
- The federal government currently levies a 15.3 percent payroll tax (7.65 percent on both the employer and employee) on the wages of all workers. If the demand for labor is relatively elastic when compared to the inelastic supply of labor, the burden of this tax will fall primarily on employees. fall primarily on employers. be divided equally between employees and employers. O Its impossible to tell from this information.arrow_forwardDraw 3 diagrams to illustrate the effects of a wage subsidy on the labor market. Explain each diagram.arrow_forwardThe following graph gives the labor market for laboratory aides in the imaginary country of Sophos. The equilibrium hourly wage is $10, and the equilibrium number of laboratory aides is 200. Suppose the federal government of Sophos has decided to institute an hourly payroll tax of $2 on laboratory aides and wants to determine whether the tax should be levied on the workers, the employers, or both (in such a way that half the tax is collected from each party). Use the graph input tool to evaluate these three proposals. Entering a number into the Tax Levied on Employers field (initially set at zero dollars per hour) shifts the demand curve down by the amount you enter, and entering a number into the Tax Levied on Workers field (initially set at zero dollars per hour) shifts the supply curve up by the amount you enter. To determine the before-tax wage for each tax proposal, adjust the amount in the Wage field until the quantity of labor supplied equals the quantity of labor demanded. You…arrow_forward
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