Question

Which of the following contributes to income inequality?

the transfer payments provided by various levels of Canadian governments

differences in consumer tastes

differences in the number of newspapers delivered to various regions

differences in ability

differences in the use of leisure time

Answer 1

From these given options

• The difference in ability contributes to income inequality ( 4th Option )

It is because -

• In general, the difference in ability results in the difference in the individuals level of productivity in a market

• Therefore, it allocates income in the hands of people who are more productive

• This reason widens the income gap between people with more and less ability.

• This widening of the income gap between less and more productive individuals, in turn, contributes to income inequality