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The government collects a specic tax of t on each hour worked. Thus, a worker whose wage is w keeps w -t after tax and
The government collects a specic tax of t on each hour worked. Thus, a worker whose wage is w keeps w -t after tax and supplies H(w- t) hours of work. The government wants to know if its tax revenue will increase or decrease if it lowers t. Give a condition for that to occur in terms of the elasticity of supply of labor, 1]. A decrease in the tax on work hours will increase government revenue if the elasticity of labor is such that (as a function of the tax, t} nis V . (Properly format your expression using the tools in the palette. Hover over toots to see keyboard shortcuts. E. g., a fraction can be created mm - less than equal to greater than
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