• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

"Discuss the likely impact on the UK economic performance of government policies designed to make income more evenly spread"

Extracts from this document...

Introduction

Economics Essay Part II "Discuss the likely impact on the UK economic performance of government policies designed to make income more evenly spread" The UK government redistributes income because it believes that this will increase economic welfare. Market failure occurs when there is not full efficiency, and an uneven distribution is unlikely to be efficient. An example of how government policy can affect economic performance is with the law of diminishing marginal utility. This states that "for an individual, the satisfaction derived from consuming an extra unit of a good falls the greater the consumption of a good". This suggests that taking resources (i.e. Through taxation) from an affluent individual to give to a poor person will lead to an increase in the combined utility of the two individuals. For example, an extra �10 to a poor family will mean more than an extra �10 to a millionaire. ...read more.

Middle

At present, there is a progressive tax system where the proportion of income paid in tax rises as the income of the taxpayer rises. This means that poorer people will pay less tax as they will be earning less. The more progressive the tax, the greater the link with the ability to pay the tax and the more likely it is to result in a redistribution of resources from the better off in society to the less well off. Classical or supply side economists would suggest that redistribution involves heavy costs in terms of economic growth and development. Raising income tax rates lowers the incentive to work, thus reducing the way in which the aggregate supply curve shifts to the right. There are other ways in which, as the government tries to make the country more equitable, the economic performance of the UK is reduced. ...read more.

Conclusion

Free market economists argue that the costs of government intervention are very large. If there is little intervention, the poor may lose out because there is little in the way of state benefits, but they will be more than compensated through increase economic growth. The wealth generated by the better off in society will trickle down to the less fortunate. For example, the poor would be better off receiving 10 percent of a 'national cake' of �20bn, than 15 percent of a cake of only �10bn. This could be the case for many employed people but there would be no mechanism apart from charity in a free market for groups such as the handicapped, the sick and the elderly to benefit from increased prosperity enjoyed by the rest of society. Therefore, government policy designed to make the spread of income more even are often very necessary, but as described previously can have a negative affect on the economic performance of the UK. ?? ?? ?? ?? ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Here's what a star student thought of this essay

4 star(s)

Response to the question

This essay responds to the question superbly, offering a number of policies to improve income inequality then discussing what effect this will have on microeconomic performance. I was particularly pleased to see an awareness of alternative interpretations, then coming to ...

Read full review

Response to the question

This essay responds to the question superbly, offering a number of policies to improve income inequality then discussing what effect this will have on microeconomic performance. I was particularly pleased to see an awareness of alternative interpretations, then coming to a justified judgement. Such skills will gain top marks in Economics essays.

Level of analysis

The analysis in this essay is strong, with difficult concepts being used well. I do have a small query with saying "An example of how government policy can affect economic performance is with the law of diminishing marginal utility" as the government doesn't use the law of diminishing marginal utility, but the concept gives a positive reason for a progressive taxation and benefits system. I was impressed to see the Classical argument discussed, but they could make the argument slightly clearer. Simply saying that "redistributing disrupts free market mechanisms, thus making the national economy less efficiency" would represent the Classical view well. A good range of policies are analysed, and I like how the essay explains each step of the mechanism. There should be some evaluation of the extent to which the policies are successful in reducing income inequality, for example making reference to the amount of government expenditure or the size of tax increases. I would note that when making reference to national minimum wages or taxation, you should always talk about increases in these, rather than introductions. If this essay wanted to explore the concept further, the Gini coefficient and Lorenz curve would've made numerical analysis slightly easier. The conclusion needed to be slightly stronger, drawing upon the points made and making a justified judgement. Phrases such s "it depends greatly upon" would've made this stronger.

Quality of writing

This essay is structured well having a clear introduction and conclusion. I would've liked to have seen a diagram, as this shows more analytical skills. Each paragraph adds something to the argument, which is nice to see for a change! Too often in Economics essays do people go off onto a tangent thinking it adds to their argument, when in fact it loses them marks for going off focus. Spelling, punctuation and grammar are strong and the style allows for a convincing argument.


Did you find this review helpful? Join our team of reviewers and help other students learn

Reviewed by groat 25/02/2012

Read less
Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Peer reviewed

    Price Discrimination Essay

    4 star(s)

    The amount of revenue is represented by area P, A, Q, O. The consumer surplus is the area above line segment P, A but below the demand curve. The diagram on the right shows that the demand curve is divided into two parts (D1 and D2). A higher price (P1)

  2. Discuss whether economic efficiency as described in text books is likely to be able ...

    Research and development also means that production methods can be improved and firms can reduce the extent of pollution and wastage. Hence firms can become allocatively efficient. It is also that the large firms are able to achieve economies of scale and will be able to move down their long-run

  1. Economics - Classical School of Thought, Keynesian School of Thought, Supply Side School of ...

    free markets they believe that in the long run economy would always settle automatically at full employment equilibrium. in the long run, but tThere might be a little different reaction in the short run as the economy adjusted to its new long- run equilibrium, we can illustrated these changes as AS (aggregate supply)

  2. Critically evaluate the perceived competitive starategies of the five clothing retail outlets, namely Edgars, ...

    The distribution of formal retail sales over a twelve month period according to product group shows the lowest percentage sales for household furniture in January (5,8 % of the total), while the highest sales are reflected for jewellery, silverware, watches and precious stones in December (17,6 % of the total).

  1. GCSE Economics Coursework

    If no, why do you think this is? Cash flow doesn't really affect this business, as it is a cash business. Some people have newspaper accounts, but this is consistent and varies from �1000- �1500 debt. But there are no bad accounts and nobody owes more than 8 weeks on their accounts.

  2. Goverment spending. How and why the Government spends and how this might affect Tescos.

    voluntary to the private sector, then the private sectors will then pay their workers, the workers pay tax (leakages going back to the government)

  1. Use game theory to analyze an oligopoly competition of two great rivals, Wal-Mart and ...

    However, the stock value meanwhile has increased from 4700000 to only 17500000 dollars, - this makes 272%. Wal-Mart has a proficient storage management system which allows it to replenish goods twice a week and reduce storage space and delivery time further.

  2. Advantages and disadvantages of minimum wage.

    The government will have to increase its spending to pay the unemployment benefits. Its own policy has caused it to face increased spending. This will eventually cause a crowding out effect, where the government will be forced to borrow money from the private sector to finance the budget deficit, thus,

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work