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Analyze the tax incidence and excess tax burden

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Reference no: EM133132884

The payroll tax in the United States is legally shared between the employee and the employer, with each paying 7.65% of wages. Using the supply and demand framework (graphical analysis), analyze the tax incidence and excess tax burden of this tax under the following scenarios:

  • Labor supply is perfectly elastic.
  • Both labor supply and labor demand are highly elastic.
  • Labor supply is relatively inelastic and labor demand is relatively elastic.
  • Labor supply is relatively elastic and labor demand is relatively inelastic.

Reference no: EM133132884

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