Why are there two different views on the effect of taxation on labor supply in the United States?
What will be an ideal response?
The effect of a tax on labor would depend on the elasticity of labor supply. Early empirical studies found that the Reagan tax cuts of the 1980s led to around a 6% increase in the number of hours worked—resulting in a relatively large elasticity estimate. However, when economists used richer data sets to estimate the same elasticity, they found a very small elasticity estimate: most estimates of the elasticity of labor are in the range of 0 to 0.1 . If the supply of labor is relatively elastic, then an increase in income taxes will have a large impact on labor supply. But if labor supply is inelastic, then a tax increase won't cause a big change in the number of hours a worker supplies.
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Refer to Figure 7.1. When both players act in their best interests, financially, the size of the economic pie is
A) $350. B) $650. C) $700. D) $900.
What would the Nash equilibrium be in this game?
a. Neither of the players would stop b. Both of the players would stop c. Player A stops d. Player B stops
A linear demand curve:
A. has a constant elasticity. B. will be more elastic when price is low and more inelastic when price is high. C. must be either perfectly inelastic or perfectly elastic. D. has a constant slope.
The majority of American workers are employed in the service sector of the economy
a. True b. False Indicate whether the statement is true or false