A. If you know that the long-run elasticity of demand for employment is -1.00, and this is composed of -.30 substitution elasticity and -.70 scale elasticity, show graphically the effects of the following potential change in federal policy.

*An increase in the Social Security tax rate for employers from 7.65 to 9 percent.

B. Show the effect if the elasticity of the short-run effect is -.15. Why is it smaller than the impact in A?