Answer to Question #268537 in Microeconomics for Sadie

Question

Illustrate and carefully explain the impact of an increase in the income tax rate from 25 percent to 35 percent on the demand for labour, supply of labour, equilibrium wage and level of employment. 

Answer 1

Higher expense rates on work pay and utilization uses lead to less work time in the legitimate market area, additional time working in the family area, a bigger underground economy, and more modest portions of public yield and work in enterprises that depend vigorously on low-wage, low-expertise work inputs