Author Question: Explain how the burden of a payroll tax changes if labor supply is relatively inelastic? Explain how ... (Read 55 times)

Lobcity · **on:** Jun 29, 2018

Explain how the burden of a payroll tax changes if labor supply is relatively inelastic? Explain how your answer would change if labor supply is relatively elastic?

What will be an ideal response?

Question 2

Refer to Table 8-32. The table above represents hypothetical data from the National Income Accounts for 2015. Use the data to calculate personal income and disposable income.

What will be an ideal response?

Bsand8 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Workers bear the bulk of the burden of a payroll tax if labor supply is relatively inelastic. However, firms bear the bulk of the burden of payroll tax if labor supply is relative elastic.

Answer to Question 2

Personal income = National income - Retained earnings + Transfer payments + Interest on government bonds.
Substituting the table values:
Personal income = 11,200 - 560 + 2,200 + 300
= 13,140 billion.

Disposable personal income = Personal income - Personal taxes
= 13,140 - 1,400 = 11,740 billion.