3.6.3 Impact of inequality on economic agents

Question 1

impact of inequality on individuals

Answer 1

• Poor housing/ homelessness
• Increased illness, lower life expectancy, mental issues
• Limited access to good education and training

Question 2

impact of inequality on society

Answer 2

• Loss of output with low employment
• Benefits and public services are direct costs
• Social problems → crime, teen preg
• Health problems

Question 3

impact of inequ and P on firms

Answer 3

• Less demand as lower incomes = lower spending
• Depends if you’re an inferior/normal firm
• Social costs are higher
• Political instability due to increasing poverty → business uncertainty
• Lower levels of education or training → deters businesses from locating or investing in certain areas
• BUT: lower wages may attract labour intensive production

Question 4

impact of low incomes on productivity

Answer 4

• Lower income = less education = less skilled = less productive
  Higher pay
• More motivated
• More productive workers are attracted to roles
• Less turnover
• Quality and customer service improve

Question 5

impact of inequ and P on the economy

Answer 5

• Economies where inequality is decreasing faster they grow more
• Redistribution → tax and benefits
• Richer people save more = reduced AD if incomes grow more