Determine effects of an increase in the income tax

Reference no: EM132131611

Question: Effects of Proportional Income Tax on Labor Supply . Suppose that the government imposes a proportional income tax on the consumer's wage income. That is, the consumer's wage income is (1 - t)w(h - l), where t is the tax rate. Determine effects of an increase in the income tax t on consumption, leisure, and labor supply. Explain your results in terms on income and substitution effects.

Reference no: EM132131611

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