Question

Give three reasons why income differentials exist.

a) What are the consequences?
b) Can you make arguments to justify government intervention to narrow the distribution on income?

Answer 1

three reasons why income differential exist-

1)differences in the growth of income of different social groups

2)employment and unemployment situation in the country

3)taxation and government policies.

a) the consequences of income inequality results as massive poverty, poor heaith, starvation and death, poor education and poor socio economic scenario thats because 50-80% of the wealth lies in the hands of top 10% earners so the 90 % those who are middle and low income group will suffer a lot.

b) government intervention can narrow down the income inequality by the imposition of right amount of tax on the right income group and then by redistribution of that tax by various social security measures to the under priviledge will help to reduce the gap.