Figure 34.2 illustrates two labor supply curves.If in-kind payments become less available in this economy and marginal tax rates decrease significantly,we would expect a shift from

Question

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If in-kind payments become less available, workers will have less disposable income to spend on goods and services, so the demand for labor will decrease. However, if marginal tax rates decrease significantly, workers will have greater incentives to work, so the labor supply curve will shift to the right. This will result in a shift from S₁ to S₂. Additionally, the movement up S_2. represents an increase in wages as a result of the increased demand for labor.

Figure 342 Illustrates Two Labor Supply Curves