Nelson&ain-Login; or Reg MindTap-Cengage Lea × /ngcengage.com/static/nb/ui/index

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Nelson&ain-Login; or Reg MindTap-Cengage Lea × /ngcengage.com/static/nb/ui/index.html?nbld-81 1 527&nbNodeld; 3 1 1 6081 34&elSBNe; 9780176745523#f&parentld; 31 5% MINDTAP Fram Ceng Aplia Homework- Assignment 3 (Part I) Due on Jun 6 at 8 PM MDT Back to Assignment Attempts: Score:12 6. Who should pay the tax? The following graph shows the labour market for research assistunts in the fictional country of Academia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 50 Suppose the government has decided to institute a $6-per-hour payroll tax on research assistants and is trying to determine whether the tax should be levied on the employer, the workers, or both (such that half the tax is collected from each side). Use the graph input tool to evaluate these three proposals. Entering a number into the Tax Levied on Employers field (initially set at zero dollars per hour) shifts the demand curve down by the amount you enter, and entering a number into the Tax Levied on Workers field (initially set at zero dollars per hour) shifts the supply curve up by the amount you enter. To determine the before-tax wage for each tax proposal, adjust the amount in the Wage field until the quantity of labour supplied equals the quantity of labour demanded. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly Graph Input Tool ket for Research Assistants Wollers per hour) 19 18 16 Labour Supplied (Number of workers) 26 62 (Number of workers) Demand Shifter Supply Shifter Tax Levied on Tax Levied on Employers (DoMars per houw Dollars per hour) 0 10 20 30 40 0 60 70 80 60 100 LABOUR (Number of

Explanation / Answer

1. When the entire tax is levied on employer, the demand schedule will fall down by 6 units. The equilibrium wage after the shift will be "6" and the quantity hired will be close to 44 (the exact value can be derived by putting the value 6 on demand shifter).

After tax wage received by worker = 6

After tax wage paid by employer = 6 + 6 = 12

2. When the entire tax is paid by the worker, the supply curve will shift upwards by 6 units. The equilibrium wage will be 12 and the quantity hired will be close to 44. (the exact value can be derived by putting the value 6 on supply shifter).

After tax wage received by worker = 12- 6 = 6

After tax wage paid by employer = 12

3. When employer pays 3 and employee pays 3 as tax, then both demand and supply shifts by 3 units. The equilibrium wage will be 10 and quantity hired will be 45. (please cross check the exact value by putting the value 3 on supply shifter and 3 on demand shifter).

After tax wage received by worker = 10 - 3 = 7

After tax wage paid by employer = 10 +3 = 13

4. The proposal in which tax is spread evenly

Since in the first two cases, the loss in wage of worker is more than the increase in payments by employer i.e fall of wage from 10 to 6 for workers and increase in payment by 2 from 10 to 12 for employer, the maximum share of tax is extracted from the employer in the third proposal where the tax is spread evenly. The employer has to pay higher by 3 from 10 to 13

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