Principles of Macroeconomics / Unit 14 MAC 1310 short lesson, about 20 seconds
Marginal Is Not Average
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The idea
A marginal tax rate applies to the next dollar earned, not to every dollar. Moving into a higher bracket raises the rate on the income above the threshold only, so the average rate paid stays below the marginal rate.
In practice
This is the same marginal-against-average distinction as unit nine's propensity to consume.
Where people slip
A raise cannot leave someone worse off through brackets alone.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
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