The way in which society's resources are distributed has long been of major concern to economists, directly

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The way in which society's resources are distributed has long been of major concern to economists, directly affecting as it does the level of social welfare. Changes in the size and distribution of national output raise important questions of efficiency and also involve basic issues of equality. However, what is equitable is a matter of considerable debate amongst economists of different political persuasions. It has been argued by the supporters of free-market capitalism that growing inequality would create incentives, kick-start enterprise, boost growth and is good for us all. Free market economists would argue that justice automatically arises from the interaction of demand and supply and the existence of competitive markets. In such a scenario, each factor receives what it is worth in terms of the value of its marginal revenue product. Disparities in income and wealth are justified by such factors as greater levels of innate or acquired skills which enable some factors to be more productive than others and earn a greater amount. Differences in the distribution of income and wealth are therefore viewed as inevitable and also desirable in that they provide the necessary incentives for individuals to study, train, supply their factor services and set up new businesses. These differences help the smooth operation of the price system and lead to an efficient resource allocation. Moreover, an unequal distribution of income is seen as necessary to ensure economic efficiency and a faster growth rate - by making the rich richer, the size of the national cake, that is real GDP, will grow, and the benefits will trickle down to the less well off.

This is the question, needs to be an introduction and 3 main body paragraphs with diagrams and a conclusion in an aqa economics style.

Extract E (lines 6-7) states that 'growing inequality would create incentives, kick-start enterprise, boost growth and is good for us all'. Using the data in the extracts and your economic knowledge, assess the view that inequality is 'good for us all.' [25 marks]