Suppose that government levies a payroll tax on employers and employees to finance employment insurance a. Using a clear, well- labeled supply- demand diagram, show how payroll tax affects labor market outcome, e.g. employment and market wage rates. b. On the graph, show the workers and firms surplus before and after the tax and deadweight loss created by the tax. c. Assume that the elasticity of labor supply and demand are 0.2 and -0.6, respectively. с. According to the law the payroll tax is split between employees and employers so that firms pay 58 percent of the tax, and employees pay 42 percent. Do you think parliament can mandate this division of the tax burden?

Suppose that government levies a payroll tax on employers and employees to finance employment insurance a. Using a clear, well- labeled supply- demand diagram, show how payroll tax affects labor market outcome, e.g. employment and market wage rates. b. On the graph, show the workers and firms surplus before and after the tax and deadweight loss created by the tax. c. Assume that the elasticity of labor supply and demand are 0.2 and -0.6, respectively. с. According to the law the payroll tax is split between employees and employers so that firms pay 58 percent of the tax, and employees pay 42 percent. Do you think parliament can mandate this division of the tax burden?

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section: Chapter Questions

Problem 5QR

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