# Question: Suppose that you can earn 16 per hour before taxes

Suppose that you can earn $16 per hour before taxes and can work up to 80 hours per week. Consider two income tax rates, 10% and 20%.

a. On the same diagram, draw the two weekly consumption–leisure budget constraints reflecting the two different tax rates.

b. Draw a set of representative indifference curves such that the income effect of the tax increase outweighs the substitution effect.

c. Draw a set of representative indifference curves such that the substitution effect of the tax increase outweighs the income effect.

a. On the same diagram, draw the two weekly consumption–leisure budget constraints reflecting the two different tax rates.

b. Draw a set of representative indifference curves such that the income effect of the tax increase outweighs the substitution effect.

c. Draw a set of representative indifference curves such that the substitution effect of the tax increase outweighs the income effect.

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