Principles Of Microeconomics, Student Value Edition Plus New Myeconlab With Pearson Etext -- Access Card Package (11th Edition)
Principles Of Microeconomics, Student Value Edition Plus New Myeconlab With Pearson Etext -- Access Card Package (11th Edition)
11th Edition
ISBN: 9780133456301
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
Question
Chapter 18, Problem 1P
To determine

Identify the role of minimum wage rate and taxes in an economy.

Expert Solution & Answer
Check Mark

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:

Amount that take home=(Wage rate per hour× 40 hour week)×52 weeks (1)

Substitute the respective values into Equation (1), the amount that takes home per year can be calculated as follows:

Amount that take home per year=($7.25× 40 hour week)×52 weeks=290.00×52Weeks=$15,080.00

$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:

Amount that take home per month=$15,080.0012=$1,256.67

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:

Amountof tax rate=$1,256.67×10100=125.667

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.

Economics Concept Introduction

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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