Question

In: Economics

a) Suppose that the government plans to impose a tax on labour employed as an input...

  1. a) Suppose that the government plans to impose a tax on labour employed as an input in agriculture. Consider agriculture as a highly labour-intensive sector and discuss the possible effects of the tax, using the general equilibrium framework.

    b) Suppose that the government of your province has decided to provide a housing subsidy for low-income families of the province to raise their standard of living. The government has also decided to impose an income tax on workers (employees) to generate funds for the subsidy. Analyze the welfare effects of this decision. What are the suggestions you can make to minimize any negative welfare costs?

Solutions

Expert Solution

a) Suppose that the government plans to impose a tax on labour employed as an input in agriculture. Consider agriculture as a highly labour-intensive sector and discuss the possible effects of the tax, using the general equilibrium framework. (2 marks)

If the govt impose the tax on the labour which were suppopsed to employed in the agroiculture , it will have a negative impact on the labour market and it will decrease the demand of the labour in the sector .This will have a drop down decrease in the total output of the agriculture sector .

b) Suppose that the government of your province has decided to provide a housing subsidy for low-income families of the province to raise their standard of living. The government has also decided to impose an income tax on workers (employees) to generate funds for the subsidy. Analyze the welfare effects of this decision. What are the suggestions you can make to minimize any negative welfare costs?

Answer

Yes , the imposition of tax here is a good decision by the govt as it will lead to a better infrastructure , those who could not afford the homes can purchase the house at subsidized rate and it will also boost the economy because of the sales .On the other hand the emlpoyer will have a little reduction on thier income but as a welfare , it will have a psoitive effect .ON THE WELFARE OF THE SOCIETY  

HAVE A GOOD DAY !

Rahul Sunny answered 9 months ago
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