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A consumer has two elements in the consumption bundle, a composite good (Y) bought with income Y that is determined by the wage rate (w)
A consumer has two elements in the consumption bundle, a composite good (Y) bought with income Y that is determined by the wage rate (w) times the hours of work per day (H) and leisure (N) defined as N=24-H. For tax revenue to increase by decreasing the marginal tax rate (w) it must be the case that: | |||||||||||||||||||
Select one: | |||||||||||||||||||
a. Leisure (N) is normal and the composite good (Y) is normal. | |||||||||||||||||||
b. Leisure (N) is inferior and the composite good (Y) is inferior. | |||||||||||||||||||
c. Leisure (N) is normal and the composite good (Y) is inferior. | |||||||||||||||||||
d. Leisure (N) is inferior and the composite good (Y) is normal. |
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