1. Using labor market supply and demand curves, illustrate what transpires when a Payroll Tax is imposed on firms. a. On your graph mark, the equilibrium wage level and employment level before and after the imposition of the payroll tax. b. If the payroll tax would be borne purely as intended as its declared statutory incidence, what would be the equilibrium wage rate? What would be equilibrium employment level? Provide a clear identification for these equilibrium points beside your illustration. c. If the payroll tax would be borne purely by employees, what would be the equilibrium wage rate? What would be equilibrium employment level? Provide a clear identification for these equilibrium points beside your illustration. d. Is the full amount of the payroll tax likely to be borne by any one party? e. Illustrate the case where the full amount of the payroll tax would be shifted to employees. What is the primary reason for this to occur?
