Chapter 5The Prices of Factorsof Production

The purpose of this chapter is to show now economics can help answer such questions as why people have different incomes. Variations are really quite considerable. In Britain in 1977, average income was more than £2,500. However, the top fifth of the population received about double this sum and people in the top 1 per cent had on average £17,000 - nearly seven times as much.1 How can we account for differences like this?

The Distribution of Personal Incomes

The answer to this question is a complex one. in the first place there are several sources from which we derive our incomes as individuals. We may get wages or salaries as employees; we may get some income in the form of interest on capital, such ...

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