Problem
The basic labor supply model assumes that wage income is untaxed. Suppose instead that a set of marginal tax rates was imposed such that the first 6 hours of labor were untaxed, the next 10 hours of labour were taxed at a rate equal to t (for example t=25%), and all labour thereafter was taxed at a rate equal to 2t (in the example, that would mean a tax rate of 50%).
1. Show on a graph how this would affect the budget line.
2. How might this alter the labour supply of individuals? Make sure you provide a complete answer including considerations of labour supply at the extensive and intensive margins (corner and Interior solutions) before and after the tax.