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Homework answers / question archive / Consider the labor market
Consider the labor market. Suppose the government imposes an income tax. 1. Draw the supply-and-demand diagram after tax. In your graph, show the following: a. size of the tax (T) b. number of workers without tax c. number of workers with tax d. equilibrium wage without tax. e. after-tax wage employers pay. f. after-tax wage workers receive. 2. In your graph in question 1, use alphabets to locate relevant areas. Then fill out a table like below. Indicate the deadweight loss due to tax. Without Tax With Tax Change Consumer Surplus Producer Surplus Tax Revenue Total Surplus Briefly explain why there is deadweight loss.
1) a.. size of the tax= b to d
b. num of worker with out tax= The number of labour employed at the equilibrium is the number of labour without tax, according to this diagram it is L*.
c.num of worker with tax= With imposition of tax the supply curve shifts right, the employment at this lavel is the number of labour employed with tax, according to this diagram it is L**.
d.equillibrim wage with out tax= w*
e.after tax wage employee pay=w**
f.after tax wage employee received= w***
please see the attached file.
