Lesson 20 - Inequality

Question 1

What are the benefits of inequality?

Answer 1

Incentive Effect
Trickle-Down Effect
Rewards Entrepreneurs
Skill Gap arguements

Question 2

Why is the Incentive Effect a benefit of inequality?

Answer 2

Hard work = Higher wage
Promise of income encourages extra effort + productivity

Question 3

Why is the Trickle-Down Effect a benefit of inequality?

Answer 3

If one person/group gains extra income, this may subconsciously ‘trickle-down’ to other members of society
E.g., Entpr creates firm, becomes rich, creates jobs + income

Question 4

Why is rewarding entrepreneurs a benefit of inequality?

Answer 4

Inequality necessitates hard work
Entrepreneurs take risks to set up business
When successful, requires reward + encouragement

Question 5

Why is the skill gap a benefit of inequality?

Answer 5

Theoretically, High skill <=> High wage
Higher skilled workers warrant more income

Question 6

What are the problems associated with inequality?

Answer 6

Stifles Growth
Decreases Education
Decreases Health

Question 7

How does inequality stifle growth?

Answer 7

Large proportion of society impoverished = Low consumption + AD

Question 8

How does inequality decrease education?

Answer 8

Unequal societies tend to underinvest in education
Leads to reduced productivity + lack of qualifications

Question 9

How does inequality decrease health?

Answer 9

Poverty reduces health + QoL
Increased ill health
Places burden on health spending