Sample Economics Paper on Why does income inequality matter?

This TMA expects you to produce an essay based on what you have learned in your DD209B course, Chapter 16, Inequality and redistribution, “Running the Economy”. The TMA requires you to apply the course concepts to your own experience and discuss the economic change of such an application. It is marked out of 100 and is worth 15% of the overall continuous assessment.

The TMA is intended to:

  • Develop your evaluative skills in analysing economic factors affecting income inequality and why it matters.
  • Show how income inequality impacts economic growth and how it can be explained using appropriate diagrams.


Please read the following article:


Why does income inequality matter?


Microeconomics is a branch of economics that deals with the behaviour of individual agents such as consumers, producers, and firms and how their interactions in markets determine the allocation of resources. One of the most pressing issues in microeconomics is income inequality. Income inequality refers to the uneven income distribution in a society where some individuals or groups have significantly more income than others.


Income inequality can have a negative impact on economic growth. When there is a significant income gap, the rich tend to save more, while the poor spend most of their income on basic necessities. This means that there is less demand for goods and services, which can slow down economic growth. On the other hand, when there is an equal income distribution, more people have the purchasing power to buy goods and services, which can lead to increased economic activity and growth.


Source: Lakner, C., Mahler, D.G., Negre, M. and Prydz, E.B., 2022. How much does reducing inequality matter for global poverty? The Journal of Economic Inequality20(3), pp.559-585.




This TMA requires you to write a structured essay to analyse income inequality’s impact on economic growth, explicitly referring to the effect of the Covid-19 pandemic.


Guidance notes for TMA

For this TMA, you are required to write a structured essay of no more than 1200 words. This means that your TMA should be in the four parts indicated in the question below. It is acceptable to use headings for each of the four sections, but you should not number your paragraphs or include an executive summary or contents sheet. For this TMA, part (a) can be considered equivalent to the introduction to the essay and part (d) can be regarded as the conclusion.


Part (a)

In this part, you need to describe why it is important for policymakers to consider income inequality when developing economic policies. Try to use this part to introduce your essay and briefly describe several reasons why income inequality matters in microeconomics. Give some figures or records to enable you to analyse income inequality in the following parts of your essay. Spending no more than 250 words on this part is probably best. (20 points)


Part (b)

In this part of the TMA, you are required to select course concepts from Chapter 16, Running the Economy textbook and use these concepts to analyse the situation described in part (a). You may briefly discuss a theory associated with how income inequality impacts overall economic growth and development in society. For example, how does inequality impact global poverty rates? Provide some conclusions from previous studies related to income inequality and build the necessary theoretical background. Again this part should not exceed 250 words. (20 points)



Part (c)

As part of this analysis, you should discuss the effect of the Covid-19 pandemic on income inequality. Describe factors using the latest data from reliable sources. You may translate your data into diagrams to illustrate your findings. Explain the impact of the pandemic on income inequality? For example, you may want to link this to the impact on poverty. You should spend no more than 500 words on this part of the TMA. (40 points)