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Suppose a Person's Utility for Leisure (L)and Consumption (Y)can Be

Question 41

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Suppose a person's utility for leisure (L)and consumption (Y)can be expressed as U = Y + L0.5.Show what happens to the person's labor supply curve when the income tax is cut from 70 percent to 30 percent.Denote hours worked as H and wage per hour as w.

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Let t = income tax rate.Since Y = net in...

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