This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.
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Section B, Question 1 a) Determine the percentage rate of taxation paid by: i. Mr Ade in column X and Y Step 1: Calculate the percentage tax rate for Mr Ade in column X. Percentage Tax Rate (X) = Tax Payment XIncome Base × 100\% Percentage Tax Rate (X) = (1000)/(10000) × 100\% = 0.1 × 100\% = 10\% Step 2: Calculate the percentage tax rate for Mr Ade in column Y. Percentage Tax Rate (Y) = Tax Payment YIncome Base × 100\% Percentage Tax Rate (Y) = (800)/(10000) × 100\% = 0.08 × 100\% = 8\% Mr Ade's percentage tax rates are: Column X: 10%, Column Y: 8% ii. Mr Uche in column X and Y Step 1: Calculate the percentage tax rate for Mr Uche in column X. Percentage Tax Rate (X) = Tax Payment XIncome Base × 100\% Percentage Tax Rate (X) = (3000)/(30000) × 100\% = 0.1 × 100\% = 10\% Step 2: Calculate the percentage tax rate for Mr Uche in column Y. Percentage Tax Rate (Y) = Tax Payment YIncome Base × 100\% Percentage Tax Rate (Y) = (1500)/(30000) × 100\% = 0.05 × 100\% = 5\% Mr Uche's percentage tax rates are: Column X: 10%, Column Y: 5% iii. Alhaji Gbadamosi in column Y Step 1: Calculate the percentage tax rate for Alhaji Gbadamosi in column Y. Percentage Tax Rate (Y) = Tax Payment YIncome Base × 100\% Percentage Tax Rate (Y) = (1300)/(15000) × 100\% ≈ 0.08666... × 100\% ≈ 8.67\% Alhaji Gbadamosi's percentage tax rate in column Y is: 8.67% b) i. Identify the system of taxation employed in column X and Y Step 1: Analyze the tax rates in column X. • Mr Ade: 10% • Alhaji Gbadamosi: (1500)/(15000) × 100\% = 10\% • Mr Uche: 10% In column X, the tax rate remains constant regardless of the income base. This is a proportional tax system. Step 2: Analyze the tax rates in column Y. • Mr Ade: 8% • Alhaji Gbadamosi: 8.67% • Mr Uche: 5% In column Y, as income increases (10,000 to 15,000 to 30,000), the percentage tax rate generally decreases (8% to 8.67% to 5%). This is a regressive tax system. The system of taxation employed is: Column X: Proportional Tax, Column Y: Regressive Tax ii. Which of the income earners has the least burden under column Y? Step 1: Compare the percentage tax rates for each income earner in column Y. • Mr Ade: 8% • Alhaji Gbadamosi: 8.67% • Mr Uche: 5% The least percentage tax rate indicates the least burden. The income earner with the least burden under column Y is: Mr Uche Send me the next one 📸