2.2 The role of markets in allocating resources

No country including the United States (US), escapes the economic problem. The US has a high GDP per head. It also has a high degree of income inequality. There are both super-rich billionaires and people living in poverty. In 2023, 12% of US households had one or more members who missed meals because they did not have enough money to buy sufficient food. Some argue that the reich should pay a very high tax rate of income tax.

b) Explain two reasons for differences in income distribution between countries.

Mali is a low income and low productivity country in Africa. Its government is using fiscal policy to reduce poverty. The country's main industries are agriculture and gold mining. In recent years, however, there have been some changes in its resource allocation. The country is developing its iron ore industry. Globally, the iron ore industry is one which has experienced a significant number of mergers in recent years.

a) State two key questions about how resources are allocated. [2]