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Taxes on income do not necessarily result in the same labor supply outcome for every worker....

Taxes on income do not necessarily result in the same labor supply outcome for every worker. Do you agree with this statement? Explain your answer using graphs showing the income and substitution effects.

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Answer #1

Here we can see that by taxing on Income, Labor supply increases and Income becomes more costly. Hence taxing income does not necessarily results in same labour supply. It depends upon the substitution effects of labour and income.

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