The tables gives the demand for and supply of teenage labour. Wage Rate - Quanti

Question

The tables gives the demand for and supply of teenage labour. Wage Rate - Quantity demanded - Quantity supplied: 4 - 3,000 - 1,000 : 5 - 2,500 - 1,500 : 6 - 2,000 - 2,000 : 7 - 1,500 - 2,500 : 8 - 1,000 - 3,000. What are the equilibrium wage rate and level of employment? What is the quantity of unemployment? If a minimum wage of $5 an hour is set for teenagers, how many hours do they work? If a minimum wage of $5 an hour is set for teenagers, how many hours are unemployed? If a minimum wage of $7 an hour is set for teenagers, what are the quantities of employment and unemployment? If a minimum wage is set at $7 an hour and demand increases by 500 hours a month, what is the wage rate paid to teenagers and how may hours of their labour is unemployed?

Explanation / Answer

marginal tax rate at income of 100k = 28%

tax = 10% of 850 + 15% of (34500 - 8500) + 25% of (83600-34500) + 28% of (100,000 - 83,600)

= 850 + 3900 + 12275 + 4592

= 21617

average tax rate = 21.6%

If income of $20,000 is sheltered, maximum that can be paid to accountant = 28% of $2,000 = $560.

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