What is the effect of this tax on labor demand

Reference no: EM13243655

Generic problem:

Suppose that under a new law, all businesses must pay a tax equalto 3% of their sales revenue. Assume that this tax is not passed onto consumers. Instead, consumers pay the same prices after the taxis imposed as they did before.

a) What is the effect of this tax on labor demand?

b) If the labor supply curve is unchanged, what will be the effectof the tax on employment and the real wage earned by workers?

Reference no: EM13243655

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