Q. 1. Last year President Obama proposed a job creation program that included a payroll tax cut?
Using economic theory and with the help of a graph discuss what is the likely effect of this tax cut on wages, employment and tax revenues. What determines whether employers or employees will benefit the most from this tax cut?

2. The demand curve for gardeners is GD = 19 - W, where G = the number of gardeners and W = the hourly wage. The supply curve is GS = 4 + 2W.

a. Graph the demand curve and the supply curve. What is the equilibrium wage and equilibrium number of gardeners hired?

b. Suppose the town government imposes a $2 per hour tax in all gardeners. Indicate the effect of the tax on the market for gardeners. What is the effect on the equilibrium wage and the equilibrium number of gardeners hired? Explain Explain how much does the gardener receive?

Explain how much does the customer pay? Explain how much does the government receive as tax revenue?