Discuss how taxes affect product and input markets. What will ...

[kellyjaisingh]

Discuss how taxes affect product and input markets.
 
  What will be an ideal response?

Question 2

What are the effects of an increase in labor productivity on potential GDP, the quantity of labor, the real wage rate, and potential GDP per hour of labor?
 
  What will be an ideal response?

[scikid]

Answer to Question 1

Taxes change behavior, and changes in behavior can affect supply and demand in markets, causing prices to change. When prices change in input markets or in output markets, some people may be made better off and some worse off. These final changes determine the ultimate burden of a tax.

Answer to Question 2

The increase in labor productivity shifts the aggregate production function curve upward. The demand for labor increases, and the demand for labor curve shifts rightward. The increase in the demand for labor raises the real wage rate and increases employment. The increase in employment as well as the upward shift of the aggregate production function increase potential GDP. Potential GDP per hour of labor increases.

[kellyjaisingh]

Thanks for the timely response, appreciate it

[dawsa925]

Excellent