Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider a society consisting of two people. Carles earns an income of $90,000 per year and Deborah earns an income of $35,000 per year. The

image text in transcribed
Consider a society consisting of two people. Carles earns an income of $90,000 per year and Deborah earns an income of $35,000 per year. The government is considering a redistribution plan that would impose a 200 tax on Carios's income and give the revenue to Deborah. Without any incentwe distortion, Carlos would retain $72,000 and Deborah would end up with $53,000, However, let us assume that since Carlos will not recelve all the income he earns, he decides to work less and earn an income of only $80,000, of which 20%580000=$16,000 will be owed in With the redistribution plan, Carios will take home an income of The $16,000 that Carlos pays la taxes will be transferred by the government to Deborah. Let us assume that since Deborah now receives payment from the government, she will not work as many hours and will earn an income from work of only $34,000 instead of her initial $35, 000. With the redistribution plan, Deborah's total income (including the government payment received) is now Without a redistribution plan, total income in this society is . After the redistribution plan is implemented, total income in this society is . Therefore, the redistribution plan total income in this society. According to the libertarian political philosophy, the government implement this redistribution plan. Why? The government is not entitied to take money away from one person and give it to anothet. The plan benefits Deborah, who is the least well off member of society: Total societal utilify will increase if the plan is enacted

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions