Use the labor/leisure model to analyze the effect on labor supply of a lump-sum tax (a tax that is i


Question: Use the labor/leisure model to analyze the effect on labor supply of a lump-sum tax (a tax that is independent of income, such as a property tax) and a proportional income tax (the tax rate t is constant regardless of earnings). Identify the income effect and the substitution effect (if any) caused by each tax. (when addressing the incoMeand substitution effects, you don’t have to illustrate them on the diagrams. Just simply discuss in words).

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