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Help needed: Economics A-level question

Hii
I'm an A level economics student and I need guidance regarding a paper 4 question, here it is:

"My higher income will make me happier in the short run. In the long run I will become accustomed to it and my happiness will return to its previous level. There is no point, therefore, in earning higher income.
Discuss how governments might achieve a more equal distribution of income. ( 13 marks )" (Nov06/p4/q3b)

If you've completed A level Econ and are good at economics, I would really appreciate your help.
Original post by cherishstudies
Hii
I'm an A level economics student and I need guidance regarding a paper 4 question, here it is:
"My higher income will make me happier in the short run. In the long run I will become accustomed to it and my happiness will return to its previous level. There is no point, therefore, in earning higher income.
Discuss how governments might achieve a more equal distribution of income. ( 13 marks )" (Nov06/p4/q3b)
If you've completed A level Econ and are good at economics, I would really appreciate your help.

They can use progressive taxation - tax higher percentage of income on those who have higher incomes
A02- ..
Increase minimum wage - to increase incomes - reduce disparity between higher income level and lower income level
A02- result in unemployment - firms can’t afford to hire as many workers as they used to as costs of production rise due to increase in wage labour costs - income will fall for some due to job losses offsetting increase in minimum wage

Supply side policies- education reforms for poorer sectors - improve human capital - result in a higher skilled workforce- can get higher income
A02- long term- Will take many years to complete education- also may be other factors more important I.e geographical immobility
Original post by pinkboi123
they can use progressive taxation - tax higher percentage of income on those who have higher incomes
a02- ..
Increase minimum wage - to increase incomes - reduce disparity between higher income level and lower income level
a02- result in unemployment - firms can’t afford to hire as many workers as they used to as costs of production rise due to increase in wage labour costs - income will fall for some due to job losses offsetting increase in minimum wage
supply side policies- education reforms for poorer sectors - improve human capital - result in a higher skilled workforce- can get higher income
a02- long term- will take many years to complete education- also may be other factors more important i.e geographical immobility


thank you so much! Im so grateful :dd
Original post by cherishstudies
Hii
I'm an A level economics student and I need guidance regarding a paper 4 question, here it is:
"My higher income will make me happier in the short run. In the long run I will become accustomed to it and my happiness will return to its previous level. There is no point, therefore, in earning higher income.
Discuss how governments might achieve a more equal distribution of income. ( 13 marks )" (Nov06/p4/q3b)
If you've completed A level Econ and are good at economics, I would really appreciate your help.

For the government to achieve a more equal distribution of income they can:

1) Increase taxation for example by increasing income tax which is a progressive tax which means that the highest earners are taxed a higher percentage than lowest earners. and then this tax revenue be used to redistribute income to society through increasing welfare payments to low income households.

EVAL: However, increasing taxes can have side effects like reducing growth in the economy and lead to deflation if consumption is affected drastically... depends on size of tax in proportion to income.

2) Another way the govt can achieve a more equal distribution of income is through raising the minimum wage which helps low income earners increase their disposable incomes. Helps those who are experiencing seasonal unemployment or frictional unemployment who are most affected in the economically active population other than the unemployed. You could draw the diagram for this drawing the minimum wage above the equilibrium in the labour market. It must be a labelled diagram too.

EVAL: You could evaluate this by saying that it is important the the minimum wage is set above the equilibrium critiquing your diagram otherwise it is ineffective and employers can charge even lower wages worsening the distribution of income within society.

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