Song earns $100,00 taxable income as an designer and ted at an average rate of 20 percent (i.e., $20,000 of tax). Answer the question below assuming that Congress increases the income tax rate such that Songs average tax rate increases from 20 percent to 25 percen

1) What will happen to the governments tax revenues if Song chooses to spend more time pursuing her other passions besides work in response to the tax rate change and therefore earns only $75,000 in taxable income?

a. Governments tax revenues would decrease by $1,250

b. Governments tax revenues would increase by $1,250

c. Governments tax revenues would decrease by $1,500

d. Governments tax revenues would increase by $1,500

e. Governments tax revenues would remain unchanged

2). What is the term that describes this type of reaction to a tax rte increase?

a. Substitution effect

B. Budget constraint

c. Income effect

d. Endowment effect

e. Price effect

3). Whaat types of taxpayers are likely to respond in the manner?

a. Taxpayers with more disposable income

b Taxpayers with less disposable income