Question

1) Briefly analyze the sources of income inequality in a market economy.

2) Briefly  Evaluate the impact of election expenses.

Answer 1

There are various sources of income inequality in a market economy:

1. Labor market determined wage rates: As in market economy, supply and demand are the driving factors of the wage rate thus more demanding skill set jobs receive higher pay. Thus possession of required skills is the key driving factor in determining wages.

2. Level of education: As level of education decides the level of skils an indiviual possess thus a person with better education get more wages in the market. Also in most nations education is not free thus pooor people are unable to receive good quality of education which leads to disparity in wages.

3.Role of Technology: With the advent of sophesticated automation technology, jobs of low skilled labors are being replaced in the market by machinary. Hence lesser pay and lesser jobs to low skilled labors is further creating inequality.

4. Other factors: Factor like gender wage discrimination, racial discrimination and reservations also leads to inequality in wages.