How does the introduction of these tax brackets change

Reference no: EM133319067

Case: Consider Greg's decision of how much to work. He initially makes$10per hour and can potentially devote up to 16 hours a day to work or leisure. His budget constraint is given byy=wh+N. - Suppose Greg has no non-labor income. Construct a graph of Greg' budget constraint. Be sure to label the intercepts on thexandyaxes. - Now suppose his nonlabor income increases from 0 to$40. How does this change your graph? Be specific. Will this change induce a substitution effect, income effect, neither effect, or both effects? - He now has$40of nonlabor income. Suppose the federal government puts a 20 percent tax on his wage earnings. How does this introduction of the tax change your graph? Will this induce a substitution effect, income effect, neither effect, or both effects - He has$40of nonlabor income. Suppose is wages increase to$12per hour but now the federal government decides a 10 percent tax on his wage earnings up to$100of pretax earnings and 25 percent on everything earned out.

Question: How does the introduction of these tax brackets change your graph? Will this induce a substitution effect, income effect, neither effect, or both effects

Reference no: EM133319067

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