3 Payroll taxes imposed on workers Consider a perfectly competitive labor market, with demand and supply curves denoted by Bo and SO, respectively. Suppose that market is in an equilibrium with the wage and employment denoted as we and E0. The government introduces a payroll tax of $1 which will be paid by workers. First consider the case where the demand curve is downward sloping and the supply is upward sloping (that is, their are neither perfectly elastic nor perfectly inelastic). Question 3.1 Sketch the a graph of the labor market before the tax is introduced, using D0, 30 and we, E0 to denote the relevant objects. I Question 3.2 Into the same figure, depict the impact of introduction of taxes, using D1, 31 to denote the labor demand and supply curves, and w1,E1 to denote the wage that a worker receives and employment in the new equilibrium, I Question 3.3 Show the worker and rm surpluses before and after the tax. Show the tax revenue that goes to the government and the deadweight loss. I Question 3.4 Suppose that the demand is perfectly inelastic, that is, it is a vertical line. In a new gure, analyze the impact of payroll taxes paid by workers. Depict worker surplus before and after taxes, and the deadweight loss from taxes. I Question 3.5 Suppose that the demand is perfectly elastic, that is, it is a horizontal line. In a new gure, analyze the impact of payroll taxes paid by workers. Depict worker surplus before and after taxes, and the deadweight loss from taxes. Notice that rm surplus is zero in this case