3: Price Determination in a Competitive Market. Flashcards
What does inequality distribution of income and wealth lead to?
Market failure
What are the effects of inequality distribution of incoming wealth?
The poor turned to crime, which leads to a reduction in living standards and health.
Can wealth be used to generate income?
Yes. For example, a house is an asset, so it is a form of wealth. Houses can be used to generate a flow of income by renting them out.
Can shares generate income?
Yes. Shares are a form of wealth and can be used to generate a flow of income through dividends.
What is likely to make the distribution of income more inequitable?
An increase in the power of large profit maximising corporations.
How do large powerful corporations make society more inequitable?
They try to reduce their costs as much as possible, so they pay low wages. This makes the poor poorer. They earn huge profits which makes the rich richer. This is often not particularly equitable as the workers at the bottom of the organisation may work just as hard.
How can you improve distribution of income and wealth?
Progressive income tax. Used in government spending to help poor. E.g. 46 billion in benefits, free school meals, NHS and public schools.
How does improving distribution of income on wealth improve society?
It makes it equitable. Crime decreases, health increases and prevents market failure.
