If there is an income tax levied on labour income, the labour demand curve ________ and the labour supply curve ________.

Question

Quizplus · Accepted Answer

An income tax on labour income decreases the net wage that workers receive, leading to a decrease in the quantity of labour supplied (shifts the labour supply curve leftward). The demand for labour by firms is not directly affected by the tax on workers, so it does not shift.

If There Is an Income Tax Levied on Labour Income