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What Factors Influence Income Distribution? Essay

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What factors influence income distribution? Critically evaluate one approach to measuring this distribution.
In the UK 22% of wealth is owned by 1% of the population and 94% by 50% of the population. There are many factors that influence this income distribution within an economy and in this essay I will discuss these factors and conclude with which factor I believe to be the most influential factor in the unequal distribution of income. I will also describe the Lorenz curve and the Gino co-efficient models of measuring the income distribution of the UK and outline the strengths and weaknesses of this model.
Most of the arguments that explain the unequal distribution of income are based around the Marginal Revenue Product (MRP) idea. The profits from hiring labour depends on the additional output produced by that additional unit of labour- this is called marginal productivity (MP) and the additional revenue gained from the extra unit of labour is called Marginal Revenue (MR). So MRPL=MPPL * MR. So each individual worker has an MRP depending on how much extra output and revenue they generate for the firm they work for. With this in mind, if a worker has a higher MRP and therefore generates more revenue for the firm, this worker will be paid a higher wage and therefore have a higher income than a worker with a smaller MRP. This is because firms that can afford to pay a higher wage will want these workers who generate more revenue and output and therefore offer a higher wage in order to attract these workers. There are many things that will change a worker’s MRP such as the level of education the individual received. One with just a few GCSE’s will have a much lower MRP than one with a degree in a recognised subject area. Those with degrees compared to those with just a few GSCE’s will also have a much higher skill level and therefore for firms to attract these workers, they will have to make the wage price higher and therefore these workers will have a higher...

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"What Factors Influence Income Distribution?". Anti Essays. 18 Dec. 2018


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