Question

Would increasing the equality of income in the country necessarily increase the total utility of the country? Explain.

Hints:

(a) consider what different people use their money for: food, medical care on the one hand and luxuries on the other. Which gives more total utility? marginal utility?

(b) Read the posted readings before you answer this discussion question

Answer 1

Yes; having a higher income means an increase in purchasing power.Equality of income increases the consumption of goods among the poor.total amount of utility increases as more of a good is consumed. People can only consume more is there have a higher disposable income. A persons level of total utility corresponds to the level of consumption, the more a person consumes the higher the total utility.

When there is income inequality a larger population is poor and the consumption rate is lower.Therefore equal income level will spark an increase in consumption and hence the total utility will rise.