I’m working on a economics multi-part question and need an explanation and answer to help me learn.
should answer ONE question from Section A and ONE question from Section B. please note the following is the EXAMPLE of the exam question from last year .
Consider an economy populated with individuals who derive utility from consumption and leisure.
1.1 Assume that an individual chooses labour supply to maximise their utility, subject to a constant income tax rate. Using diagrams, analyse how the constant income tax rate affects labour supply and welfare of an individual in this economy. Explain the importance of the participation decision in determining effects on labour supply.
1.2 Explain how and why you need to modify the assumptions of the model economy in 1.1, and which additional assumptions you need to add, to examine optimal income taxes in the Mirrleesian framework.