Identify the role of minimum wage rate and taxes in an economy.
Explanation of Solution
The given minimum wage rate is $7.25 per hour and the working is 40 hours in a week. The tax rate is 10 % of the total pay. The total week in a year is 52. Then, the amount that takes home per year can be calculated by using formula as follows:
Substitute the respective values into Equation (1), the amount that takes home per year can be calculated as follows:
$15,080.00 is the amount that takes home per year. The amount that takes home per month can be calculated by dividing this amount by 12 (12 months in a year) as follows:
The amount that takes home per month is $1256.67.
10% tax rate of the amount that takes home per month can be calculated as follows:
After deducting the tax rate, the amount that takes per month is $1131.00.
The reasonable apartment will cost to rent $1256.67. This is the amount that takes home per month. Preparing a hypothetical budget for this family will be based on the costs associated with the basic necessities of the family.
Minimum wage: The minimum wage rate is the lowest wage rate that firms are permitted to pay the workers.
Tax: The tax is a compulsory payment imposed by the government on workers, business groups, or added to the cost of goods and services. This is the major revenue source of the government.
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