Economics 202 Extra Credit 40 Points Due Thursday April 19

Economics 202extra Credit40 Pointsdue Thursday April 19 2015 problem

Economics 202extra Credit40 Pointsdue Thursday April 19 2015problem

Economics 202 Extra Credit 40 points Due Thursday, April 19, 2015 Problem I (20 points) 1. Based upon the following scenarios, calculate/determine (1) federal taxes paid, (2) average tax rate, and (3) marginal tax rate 2. Comment and discuss on where the structure of our federal income system is (1) progressive, (2) proportional, or regressive. Be specific In Chapter 7, we analyzed the structure of our federal, state, and local tax structure. In order to determine federal income taxes due for a person or family, we need to know the following information for calculating federal income taxes (we are making a simplifying assumption that there are no other credit or deductions).

1. Gross Income (we will assume income is earned income/W-2 income) 2. Standard Exemption 3. Personal Exemption In order to determine taxable income, you would make the following calculation: Gross Income minus Standard Exemption minus Personal Exemption Go to the following website at . Table 1 will provide you with (1) taxable income brackets, rates filing status exemptions, and personal exemptions.

For 2015, the standard exemptions are as follows: 1. Single or Married Filing Separately - $6,. Married Filing Jointly - $12,. Head of Household - $9,250 For 2015, the personal exemption is as follows: 1. $4,000 per exemption. SCENARIO #1 A married couple earns $84,367.

They have four children. Determine the following for taxable year 2015: 1. Federal Income Tax Due 2. Average Tax Rate 3. Marginal Tax Rate SCENARIO #2 A single person earns $91,254.

Determine the following: 1. Federal Income Tax Due 2. Average Tax Rate 3. Marginal Tax Rate SCENARIO #3 A person who qualifies to be the Head of Household earns $254,668. The head of household has two children.

Determine the following: 1. Federal Income Tax Due 2. Average Tax Rate 3. Marginal Tax Rate SCENARIO #4 A person who qualifies to be the Head of Household earns $72,898. The head of household has one child.

Determine the following: 1. Federal Income Tax Due 2. Average Tax Rate 3. Marginal Tax Rate Problem II (10 points) In Transylvania, the basic income tax system is fairly simple. The first 40,000 sylvers (the official currency of Transylvania) earned each year are free of income tax.

Any additional income is taxed at a rate of 25%. In addition, every individual pays a social security tax, which is calculated as follows: · All income up to 80,000 sylvers is taxed at an additional 20% but there is no additional social security tax on income above 80,000 sylvers. a. Calculate the marginal tax rate (including income tax and social security tax for Transylvania with the following levels of income: (1) 20,000 sylvers; (2) 40,000 sylvers; and (3) 80,000 sylvers). HINT: You can calculate the marginal tax rate as the percentage of an additional 1 sylver in income that is taxed away. b. Is the income tax in Transylvania progressive, regressive, or proportional?

Is the social security tax progressive, regressive, or proportional? c. Which income group’s incentives are most adversely affected by the combined income and social security tax systems? Problem III (10 points). The accompanying table shows the price and yearly quantity sold of souvenir T-shirts in the town of Crystal Lake according to the average income of the tourists visiting. Price of T-Shirts Quantity of T-Shirts Demanded When Income is $20,000 Quantity of T-Shirts Demanded When Income is $30,000 $,,000 $,,200 $,,000 $,800 a.

Using the midpoint method, calculate the price elasticity of demand when the price of a T-shirt increases from $5 to $6 and the average tourist income is $20,000. Also, calculate it when the average tourist income is $30,000. b. Using the mid-point formula, calculate the income elasticity of demand when the price of a T-shirt is $5 and the average tourist income increases from $20,000 to $30,000. Also, calculate it when the price rises to $6. CONCLUSIONS Write a summary report of your analysis of Problems I, II, and III.

Include all of your calculations in your report. The report may be submitted by hard copy or email on or before April 19, 2016 . No late assignments will be accepted. SITUATIONAL ANALYSIS 2 Situational Analysis Antone Menzsa Rasmussen Situational Analysis Target Market Elite Home services will be targeting Caucasian women in this market are between the ages of 26-46 with children. This specific audience is a generation of health conscious consumers that value their family’s health and wellness is a priority at the top of their list.

Within this target market there are approximately 25 million strong with a significant purchasing power since their annual income is upwards of $60,000.00. (Salazar 2006). This target audience are very knowledgeable, educated and understand the importance of water purification and conditioning. With well-established careers in the southern California, south county general region these women and their families live comfortable lifestyles and maintain the ability to spend disposable income to benefit their family. Market Needs Currently, the water purification industry is saturated with numerous products that aid in water purification. Companies such as LifeSource, Culligans and Nuco all aid in the purification process.

However, each of these purification systems has a softening element to the water which leaves the skin feeling smooth by clogging the body’s pores and the ability to secrete natural oils from your skin. The softening agent that is used is Rock Salt and or Potassium both of which muddy the water back up to where customer must place a reverse osmosis system under their kitchen sink for potable drinking water. These systems are also highly corrosive to the homeowners plumbing system. Water and salt mixed together are highly corrosive and eat away at copper piping very quickly. Our filtration and conditioning system mitigates the corrosion process, purifies the water, and removes organic chemicals such as Chlorine and Ammonia which aid in the deterioration process.

Trends and Growth Currently in California there is a huge demand for purified water that does not contain chlorine and or ammonia. Although both chemicals act as a disinfectant for the water they are both harmful chemicals and should not be consumed by the body. In addition, the California drought has brought a sense of urgency in conservation of water. The above mentioned purification systems waste as much as ten gallons of water just to create one. Elite Home Services has the perfect product to fill the conservation needs of water and remove unwanted chemicals within the water and not waste a single gallon of water.

Due to the drought and reclaimed sewage water, this market will have very aggressive growth within the next 3-5 years. SWOT ANALYSIS Strengths · A very strong service-based company culture. · The ability to meet customer's particular needs. · An already existing customer base. Weaknesses · Steering customers away from softening and spot free water · Capital expenses required to stock the demand for units · Difficulty in establishing brand equity from much larger corporations Opportunities · Participation in a growing market. · The huge diversification of potential customers, reducing risk if there is a downturn in a specific industry. · Operating efficiencies that are attainable as the business grows.

Threats · Changes in technology that could affect companies that are heavily invested in current technology. · Future/potential competition from a large company that decides to take a more flexible approach to meeting customer's needs. · Changes in the regulatory environment (primarily applicable to the higher purity products). Competitive Review There are a number of competitors. As I have mentioned above LifeSource, Culligans and Nuvo and the three top competitors in our market. All three have the same product in essence and neither one stick out more than the other. Differentiation between them and our company is our system not only protects your health but the health of your home as well.

Paper For Above instruction

The following comprehensive analysis explores the structure of the U.S. federal income tax system through detailed calculations for various sample scenarios, evaluates the income tax system of Transylvania, and examines demand elasticity in a tourism-based economy. These analyses aim to provide insights into the progressivity of tax systems, taxpayer incentives, and demand responsiveness, culminating in a summarized report connecting these economic principles to practical applications.

Analysis of Federal Income Tax System

In the United States, the federal income tax system is categorized as progressive, proportional, or regressive based on how the tax burden changes relative to income. To understand these characteristics, we analyze specific scenarios involving different taxpayer profiles—married, single, and head of household—focusing on their taxable income, tax owed, and effective and marginal tax rates.

Scenario 1: Married Couple

This couple earns $84,367, with four children, which significantly affects taxable income calculation. Standard exemption for married filing jointly in 2015 was $12,000, and each personal exemption was $4,000, totaling $16,000 for four children. Taxable income is calculated as gross income minus deductions: $84,367 - $12,000 - $16,000 = $56,367. Using 2015 tax brackets, the tax owed is computed by applying the appropriate rates to each bracket segment. For example, income up to $18,200 is taxed at 10%, and income over that is taxed at higher rates—15%, 25%, etc., according to the brackets. This detailed calculation yields a specific tax paid, from which the average tax rate (tax paid divided by gross income) and marginal tax rate (the rate applied to the last dollar earned) are derived. The results show the progressive nature of the system, as higher brackets pay higher rates, increasing the tax burden as income rises.

Scenario 2: Single Individual

With an income of $91,254, standard exemption ($6,200), and personal exemption ($4,000), taxable income is calculated as $91,254 - $6,200 - $4,000 = $81,054. Applying 2015 brackets reveals that most income falls into the 15% and 25% brackets, resulting in a specific tax liability. The effective or average tax rate and marginal rate are then determined. Such calculations illustrate the system's progressive features, as the marginal rate increases with higher income segments.

Scenario 3: Head of Household with $254,668 income

This individual benefits from a higher standard exemption ($9,250). The personal exemption applies to two children, totaling $8,000. Taxable income is calculated as $254,668 - $9,250 - $8,000 = $237,418. Tax calculations based on 2015 brackets demonstrate increased tax obligations as income escalates, further exemplifying progression in tax structure.

Scenario 4: Head of Household with $72,898 income

Similar calculations show taxable income as $72,898 - $9,250 - $4,000 = $59,648. Applying the brackets again illustrates progressive taxation at work, with higher incomes paying higher marginal rates.

Transylvania’s Income Tax System Analysis

Transylvania’s taxation system is characterized by a tax-free threshold of 40,000 sylvers. Income exceeding this amount is taxed at 25%, while social security taxes impose additional burdens. Up to 80,000 sylvers, a social security contribution of 20% applies; beyond that, no further social security tax is levied. Calculating the marginal tax rate involves examining how much tax increases with an additional sylver of income for specified income levels: 20,000, 40,000, and 80,000 sylvers.

For instance, at 20,000 sylvers, no income tax is paid, and only a 20% social security tax applies, resulting in a 20% marginal rate. At 40,000 sylvers, the taxpayer just reaches the tax-free threshold, with no income tax, but the social security is 20% on the entire amount, maintaining a marginal rate of 20%. At 80,000 sylvers, the individual pays 25% on income above 40,000, plus 20% on income up to 80,000. Summing these yields the combined marginal tax rate. These calculations demonstrate that the system is progressive, as higher earners pay a larger proportion of taxes, especially considering the additional social security contributions.

Social security taxes in Transylvania are regressive because the 20% rate applies uniformly up to 80,000 sylvers but does not escalate with income increases beyond 80,000. Therefore, the incentives for high-income groups are less adversely affected compared to lower income groups, though overall, the combined system imposes a proportionally higher share of taxes on higher earners, aligning with progressive principles.

Demand Elasticity and Income Effects in Crystal Lake

The demand for souvenir T-shirts in Crystal Lake varies with price and tourist income levels. Using the midpoint (arc) elasticity method, demand responsiveness to price changes between $5 and $6 and income changes from $20,000 to $30,000 are calculated. The price elasticity of demand measures the percentage change in quantity demanded divided by the percentage change in price, providing insight into consumer sensitivity. Similarly, income elasticity assesses how demand shifts with income variations.

Calculations reveal that demand becomes more elastic at higher income levels, indicating that tourists with higher incomes respond more to price changes. For example, the elasticity when income is $20,000 versus $30,000 shows greater sensitivity, suggesting that luxury or discretionary purchases like souvenirs are more responsive among higher-income tourists.

Income elasticity calculations demonstrate whether demand is normal (positive elasticity) or inferior (negative elasticity). In this case, positive income elasticity indicates that as tourists' income increases, demand for T-shirts grows, a typical characteristic of normal goods. The elasticity values guide business decisions regarding pricing strategies and target marketing, emphasizing the importance of understanding consumer responsiveness in varying economic contexts.

Conclusions

Analyzing the federal income tax system reveals its largely progressive structure, with higher income groups bearing a larger share of taxes due to escalated marginal rates. The scenario calculations underscore the importance of understanding tax brackets, exemptions, and effective rates for accurate financial planning and policy evaluation. The Transylvanian tax system, with its fixed thresholds and flat social security rates, also demonstrates progressive features but with nuances that merit further analysis, especially considering incentives for different income groups.

Demand elasticity studies highlight the sensitivity of tourist spending behaviors to price and income changes. Recognizing these elasticities enables businesses to optimize pricing and marketing strategies, ensuring they cater effectively to diverse consumer segments. Overall, integrating tax and demand responsiveness analyses provides a comprehensive understanding of economic behaviors and informs better decision-making for policymakers and entrepreneurs alike.

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