Suppose that,after government imposed an income tax on labor income,the wages paid by employers rose $1.00 and the wages received by employees fell by $0.20.What does that reveal about the elasticities of supply and demand?

Question

Quizplus · Accepted Answer

The increase in wages paid by employers and the smaller decrease in wages received by employees suggest that the supply of labor is more elastic than the demand for labor. This is because the burden of the tax is falling more on employers, indicating that employees (supply side) are more responsive to wage changes than employers (demand side).

Suppose That,after Government Imposed an Income Tax on Labor Income,the