What happens when a tax is levied on the labour force and the labour supply curve is relatively elastic
A)The supply of labour will fall a small amount.
B)The supply of labour will fall a large amount when.
C)The supply of labour will rise a small amount when.
D)The supply of labour will rise a large amount when.

Question

Quizplus · Accepted Answer

When the labour supply curve is relatively elastic, it means that even a small change in the wage rate can have a significant impact on the amount of labour supplied. Therefore, when a tax is levied on the labour force, it increases the cost of labour for firms, which reduces the demand for labour. As a result, workers will reduce their labour supply by a significant amount to avoid paying the tax, leading to a large decrease in the supply of labour.

What Happens When a Tax Is Levied on the Labour