Need help with 2 questions from Year 11 Chapter 2 (1 Viewer)

[SterlingC]

1. Explain how the distribution of income in an economy may influence the distribution of output.

2. Outline the role of factors of production in the distribution of income.

Thanks

 

[KingTings]

For question 1 you could mention that an unfair distribution of income results in an unfair distribution of output. This is because demand from higher-income earners will take priority over lower-income earners due to the opportunity to implement higher prices. This is because higher prices take up the same percentage of disposable income for the rich as lower prices for the poor, allowing companies to exploit the income of the rich for a profit by increasing prices. In doing so, production in the economy may be majorly focused on higher-quality items, reducing the goods distributed to the poor-middle class?

Question 2 could be that owners of land, labour, capital and enterprise pay 'factor income payments', which refers to expenses needed to be paid to utilise these resources in production. These payments provide awards for some parties such as land owners, employees, investors and government, giving them an income. Payments to government are mostly redistributed via social welfare payments. Therefor, the ownership of factors of production gives an economy a more sufficient distribution of income.

Hope this helps.