List and briefly describe the three key reasons for income inequality in a market-based economy.
What will be an ideal response?
1. Differences in labor skills and effort: some people have better labor skills, work longer hours, and/or work at more demanding jobs, and therefore earn more income.
2. Luck and misfortune: some people are luckier than others at investing their money, starting a business, picking an occupation, and having good health, and these people tend to earn more income.
3. Discrimination: some people are paid lower wages or have limited opportunities for education and work because of their race or gender.
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If demand price elasticity measures 2, this implies that consumers would:
a. buy twice as much of the product if the price drops 10 percent. b. require a 2 percent drop in price to increase their purchases by 1 percent. c. buy 2 percent more of the product in response to a 1 percent drop in price. d. require at least a $2 increase in price before showing any response to the price increase. e. buy twice as much of the product if the price drops 1 percent.
If the price of labor falls, we can expect
a. demand for labor will increase b. quantity demanded of labor will increase c. demand for labor will decrease d. quantity demanded of labor will decrease e. marginal labor cost to rise
Classical economists and monetarists believe that the investment curve is
a. vertical b. steep to reflect the view that changes in investment are relatively insensitive to changes in the interest rate c. steep to reflect the view that changes in investment are very sensitive to changes in the interest rate d. unrelated to the interest rate e. relatively flat to reflect the view that changes in investment are sensitive to changes in the interest rate
Which presidential candidate made this pledge: "Read my lips: no new taxes"?
A. Gerald Ford (1974) B. Jimmy Carter (1976) C. Ronald Reagan (1980) D. George H.W. Bush (1988)