Preview

Market Failure of Inequality and Poverty

Satisfactory Essays
Open Document
Open Document
620 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Market Failure of Inequality and Poverty
Market Failure

Definition: Market failure occurs whenever markets fail to deliver an efficient allocation of resources and the result is a loss of economic and social welfare.
Market failure exists when the competitive outcome of markets is not satisfactory from the point of view of society. What is satisfactory nearly always involves value judgments.

Market Failure of Inequality and Poverty
Why is inequality and poverty a market failure?
In a market economy an individual’s ability to consume goods & services depends upon his/her income or other resources such as savings
An unequal distribution of income and wealth may result in an unsatisfactory allocation of resources and can also lead to alienation and encourage crime with negative consequences for the rest of society
The free-market system will not always respond to the needs and wants of people with insufficient economic votes to have any impact on market demand. What matters in a market based system is your effective demand for goods and services.
Examples of inequality/poverty:
The distribution of income in the UK.
In 2008/09, income before taxes and benefits of the top fifth of households in the UK was £73,800 per year on average compared with £5,000 for the bottom fifth, a ratio of 15 to one.
After taking account of taxes and benefits, the gap between the top and the bottom fifth was reduced with average income of £53,900 per year and £13,600, respectively, a ratio of four to one. This shows that the tax and benefits system works in a progressive way to reduce the scale of income inequality.
In the UK, the share of total income earned by the top 1% income earners rose from 6% in 1975 to 14% in 2005
The gap between lowest and higher income groups can be seen in this chart below:

Another way of showing this income data is in the table below – this shows the distribution of disposable income by household income quintile. The data is for 2008-09.

Bottom Fifth
Next Fifth

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Per-capita tax payments by rich families are higher than per-capita tax payments by poor families.…

    • 1215 Words
    • 5 Pages
    Satisfactory Essays
  • Good Essays

    Income and wealth distribution: comparing the differences in levels of income and wealth between different social groups help measure inequalities in society. The income is a regular flow of money earned by someone working or from someone’s benefits, pension or their savings. Wealth is defined on property, shares or other belongings that could be sold to make an income. This is very hard to measure accurately and to define. There is not date on income levels that are both easily available and reliable. Date from the government has shown that the income and wealth of the population is distributed unfairly. A massive report by the labour government showed that in 2010 the richest 10percent of the population are now 100percent better off the poorest. Since 1980 over the last 30years Britain has become more unequal than ever before. It is a fact that there have been a number of major studies alongside major reviews of the social factors of health, which have confirmed a clear link between socio-economic background such as income or occupation and health. The most recent of these, the Marmot Review, found that in England, people living in the poorest neighbourhoods will, on average, die seven years earlier than people living in the richest neighbourhoods (Marmot, 2010). These health inequalities are not just limited to life expectancy but also infant mortality, mental health, physical health and so on.…

    • 1735 Words
    • 7 Pages
    Good Essays
  • Better Essays

    The rich, the middle class and the poor. These so-called "titles" are defining Americans today. What is income inequality and why is it a problem? Income inequality is the extent to which income is distributed in a population. In the United States, that gap between the poor and the rich has expanded immensely over the past ten years. Income inequality is a constantly debated topic today with different opinions and solutions; economists, writers, and politicians all have different views. For example, Paul Krugman and Robert Reich have different opinions than Maura Pennington. As people of different social status, religion, and political preferences view inequality differently, the solution is vastly different amongst these…

    • 1617 Words
    • 7 Pages
    Better Essays
  • Better Essays

    Economic inequality is a touchy subject, with people that view it as a good thing but most viewing it as a bad thing. In his article, “How income inequality benefits everybody”, George Will goes over why economic inequality is a good thing by going over various things that get affected when the wealthy corporations outsource jobs and products. He uses examples from an author, John Tamny from Forbes, that are pointed to give the reason why outsourcing and the rich getting richer makes prices go down. George Will also gives statistics in the form of dates and prices as examples to show the reader how the outsourcing can affect prices. By focusing on how economic inequality benefits people, George Will overlooks the deeper problem of the major…

    • 1634 Words
    • 7 Pages
    Better Essays
  • Good Essays

    • In 1970, the top 1% of earners took home 9% of the nation’s total income. Today, they take in approximately 23%.…

    • 3280 Words
    • 14 Pages
    Good Essays
  • Satisfactory Essays

    Employment and income are related and are the most obvious factors to this change. Without stable employment there is no possible way to move up the social ladder because of lack of income. Household income is what divides the classes and is directly related to the type of job one has. According to the text the highest fifth percentile bring in more then $100,000 per year in annual salaries with the second fifth percentile making $20,300 a year and up. In the video, there was one family where at the end of the video the father ended up loosing his…

    • 240 Words
    • 1 Page
    Satisfactory Essays
  • Powerful Essays

    In 2010, there were 3,371,062 housing units in New York City, with a home ownership rate of 32.6% (Shwegler 33). In the same year, there were 3,049,978 households with an average of 3 people per household. The 2010 per capita income was $31,417 and the average household income was $51,270. It is worth noting that 19.4% of the people were living below the poverty line (Shwegler 33-34).…

    • 841 Words
    • 4 Pages
    Powerful Essays
  • Good Essays

    Quintile Income Inequality

    • 1654 Words
    • 7 Pages

    Income inequality is often associated with negative things such as decreased quality of life and a lack of social mobility. Yet, the lower classes are receiving less and less of the United States’ overall income while the top earners' share is increasing. Why? This paper will explore causes of the growing income inequality as well as possible solutions to slowing it down.…

    • 1654 Words
    • 7 Pages
    Good Essays
  • Good Essays

    If every household gave the same amount of their income in taxes than the disparity of income would be less. Many Americans today don’t care much for the tax code system, and it’s not because they pay too much. It’s that they feel that the more “wealthy” aren’t paying their fair share. Well according to The Center of American Progress the OECD report finds that the richest 10% of American households earn about 28% of the overall income pie. That’s a lot. Surely they can spare a…

    • 893 Words
    • 4 Pages
    Good Essays
  • Good Essays

    The Economic Policy Institute argues that between 1979 and 2000 the real income of households in the bottom 20% of earners grew by 6.4%, while the households in the top 20% grew by 70%. An even more amazing statistic…

    • 603 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Inequality exists around us. One of the inequalities is the income received by a person or member of a family. Income inequality refers to the various incomes within a given population. This income includes wages, salaries, pensions, and interest derived from the assets. The economy nowadays is very dynamic and is constantly growing, but the top is absorbing the biggest portion of the growth. As Arthur Okun once said: “Inequality is the price America pays for a dynamic, efficient economy; we may not like it, but the alternatives are worse. As long as the bottom and the middle are moving up, there is no reason to mind if the top is moving up faster, except perhaps for an ideological grudge against the rich—what conservatives call the politics…

    • 784 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Minimun Wage

    • 322 Words
    • 2 Pages

    Market failures have negative effects on the economy because the best allocation of resources is not attained. In other words, the social costs of producing the good or service (all of the opportunity costs of the input resources used in its creation) are not minimized, and this results in a waste of some resources.…

    • 322 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Capitalism demands that “wealth is on top and debt is on the bottom” (Salon.com) Income inequality rates are higher in the United States than any other developed democracy and the rates are growing. Large corporations and the top 1% get breaks that the middle and lower class do not. Such as tax breaks, bailouts, and bankruptcy laws being loosened.…

    • 313 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    In Jonathan Rauch’s article called The Wealth Divide Between Rich and Poor Harms the US Economy he talks about how the large gap between the upper class and the lower and middle classes is, contrariwise to past beliefs, actually quite harmful to the economy. So much so that it has and can causes depressions. Many progressives are beginning to believe that inequality has already reached damaging levels, which has not been the mainstream economic consensus for the past few decades. It was actually believed that inequality was economically neutral and did nothing to harm the economy. But evidence has appeared and been collected that supports the view that extreme inequality is, indeed, damaging…

    • 797 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Hong Kong Minimum Wage

    • 1021 Words
    • 5 Pages

    4. Robert. J & Alastair. M (2010). Institute for fiscal studies. Poverty and inequality in UK : 2010.Retrieved on September, 22, 2010 from http://www.ifs.org.uk/comms/comm116.pdf…

    • 1021 Words
    • 5 Pages
    Good Essays