(modiÖed R & G) Suppose the individuals view their loss of income from income taxes as...
(modiÖed R & G) Suppose the individuals view their
loss of income from income taxes as offset by the benefits of
public services purchased with revenues. How are their labor supply
decisions affected?
(a) Draw the optimal choice of a representative individual in
leisure-consumption space before tax imposition.
(b) Describe the change of budget constraint when the income tax is
imposed and all the
revenue from income tax is returned as the individual's consumption
through public
service provision.
(c) Show the change of optimal choice of the representative
individual.
Homework Answers
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(modiÖed R & G) Suppose the individuals view their
loss of income from income taxes as...
(modiÖed R & G) Suppose the individuals view their loss of income from income taxes as offset by the benefits of pub...
(modiÖed R & G) Suppose the individuals view their loss of income from income taxes as offset by the benefits of public services purchased with revenues. How are their labor supply decisions affected? (a) Draw the optimal choice of a representative individual in leisure-consumption space before tax imposition. (b) Describe the change of budget constraint when the income tax is imposed and all the revenue from income tax is returned as the individual's consumption through public service provision. (c) Show...
Pierre values consuming goods (C) and enjoying leisure (l). Pierre has h = 1 units of...
Pierre values consuming goods (C) and enjoying leisure (l). Pierre has h = 1 units of time to divide between working and enjoying leisure. For each hour worked, he receives w = 1 units of the consumption good. Suppose that Pierre’s preferences are described by the the utility function U(C, l) = C 2/3 l 1/3 . Pierre also owns shares in a factory which gives him an additional π = 0.125 units of income. The government in this economy...
Suppose Tom has a utility function U=C*L C= consumption L= hours of leisure Tom has 100...
Suppose Tom has a utility function U=C*L C= consumption L= hours of leisure Tom has 100 hours to divide between work and leisure per week wage is $20/hr 1. Write down budget constraint in terms of consumption and hours of work 2.Tom make decisions on hours of work, leisure and consumption to max. utility. Explain why we can collapse this problem to one in which he chooses hours of leisure only 3. Find optimal hours of work and total consumption...
Pierre values consuming goods (C) and enjoying leisure (L). Pierre has h = 1 units of...
Pierre values consuming goods (C) and enjoying leisure (L). Pierre has h = 1 units of time to divide between working and enjoying leisure. For each hour worked, he receives w = 1 units of the consumption good. Suppose that Pierre's preferences are described by the the utility function U(C,)=2/31/3 Pierre also owns shares in a factory which gives him an additional = 0.125 units of income. The government in this economy taxes labour income only and uses the proceeds...
2. Capital Tax: In our two period consumption-savings model, suppose that positive interest income in period...
2. Capital Tax: In our two period consumption-savings model, suppose that positive interest income in period 2 is taxed at rate t. Assume that Ao -0, the individual has positive endowment in both periods, and nominal prices for the good remain the same despite the ax (a) Write down the budget constraints in each period and obtain an algebraic expression for his life-time budget constraint. (b) Suppose that at the optimal choice, the representative individual is choosing not to save...
4. A recurring idea in Congress is to move the United States further away from a...
4. A recurring idea in Congress is to move the United States further away from a system of income taxes and towards a system of consumption taxes. A nationwide consumption tax would essentially be a national sales tax, a system that many Western European countries have. It is often referred to as a value-added tax or a VAT Negative consumption is ruled out because it makes no 'economic sense. Zero consumption would be subop timal behavior with either of these...
Consider a household facing the following problem
Consider a household facing the following problem: mgx U(c.h) = { ine+(1 – žin(1 – 1) subject to c=wh, where c denotes consumption, h hours worked and w is the wage. a. Describe the trade-off that the household faces and solve for hours worked, i.e. labour supply. b. Suppose that the government introduces a proportional tax, T, on labour income so that the budget constraint becomes c = (1 - T)wh. The tax revenue will be used to finance the...
This problem focuses on the labor supply effects of subsidies. Assume Ann gets utility from consumption...
This problem focuses on the labor supply effects of subsidies. Assume Ann gets utility from consumption c and leisure l. Ann chooses how many hours to supply to the labor market each day (h) but only has 16 hours per day for work and leisure (assuming 8 hours of sleep). For each hour she works, she earns an hourly wage w = 15. Assume Ann has no unearned income v = 0. 1. Write down Ann’s daily budget constraint in...
Please see the attachment for the full question. How should I draw the income leisure graph...
Please see the attachment for the full question.
How should I draw the income leisure graph from part a) and part
b), and what are the slopes? Also, what are the differences between
part a) and b), and how will they affect the economy? Thank
you.
2. Consider a province with the following employment insurance (EI) program. Individuals choose to allocate labour and leisure across 52 weeks of the year. All individuals who have worked for at least 10 weeks...
3. Consider the two period setup for the household . Suppose the government initially raises revenue...
3. Consider the two period setup for the household . Suppose the government initially raises revenue only by taxing interest income. This means the individual's budget constraint is: C2 1(1 T)r where T is the tax rate. The government's revenue is zero in period 1 and TrĢ 0) where C is the individual's choice of Cı given the tax rate. Now suppose the government eliminates the taxation of interest income and instead institutes lump-sum taxes of amounts Tı and T2...
Pierre values consuming goods (C) and enjoying leisure (L). Pierre has h = 1 units of time to divide between working and enjoying leisure. For each hour worked, he receives w = 1 units of the consumption good. Suppose that Pierre's preferences are described by the the utility function U(C,)=2/31/3 Pierre also owns shares in a factory which gives him an additional = 0.125 units of income. The government in this economy taxes labour income only and uses the proceeds...
2. Capital Tax: In our two period consumption-savings model, suppose that positive interest income in period 2 is taxed at rate t. Assume that Ao -0, the individual has positive endowment in both periods, and nominal prices for the good remain the same despite the ax (a) Write down the budget constraints in each period and obtain an algebraic expression for his life-time budget constraint. (b) Suppose that at the optimal choice, the representative individual is choosing not to save...
4. A recurring idea in Congress is to move the United States further away from a system of income taxes and towards a system of consumption taxes. A nationwide consumption tax would essentially be a national sales tax, a system that many Western European countries have. It is often referred to as a value-added tax or a VAT Negative consumption is ruled out because it makes no 'economic sense. Zero consumption would be subop timal behavior with either of these...
Please see the attachment for the full question.
How should I draw the income leisure graph from part a) and part
b), and what are the slopes? Also, what are the differences between
part a) and b), and how will they affect the economy? Thank
you.
2. Consider a province with the following employment insurance (EI) program. Individuals choose to allocate labour and leisure across 52 weeks of the year. All individuals who have worked for at least 10 weeks...
3. Consider the two period setup for the household . Suppose the government initially raises revenue only by taxing interest income. This means the individual's budget constraint is: C2 1(1 T)r where T is the tax rate. The government's revenue is zero in period 1 and TrĢ 0) where C is the individual's choice of Cı given the tax rate. Now suppose the government eliminates the taxation of interest income and instead institutes lump-sum taxes of amounts Tı and T2...
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