Notes: How is the distribution of income decided in a free market economy? Market economies provide people with income as a reward for their contribution to the production process. The owners of natural resources, capital, entrepreneurial skills, or labour which is used in the production process receive income based on the value of their input. The price that is paid for inputs determines the individuals share of total output and will generally depend on how …showed first 75 words of 1236 total…

…showed last 75 words of 1236 total…than some given fraction of typical incomes. Poverty line: measure of the level of income necessary to subsist in a society. Calculated as that level of income at which a household will devote 2/3 of its income to basic necessities. Poverty index: I= (P/N)(B-A)/A Where P- no. of people below the poverty line, N- total no. of people in society, B- poverty line income, A-avg. income of those people below the poverty line.