Inequality, Poverty, and Discrimination

Read this chapter for a more detailed look at the topic of income inequality and discrimination in the labor markets as these are real examples of market failures. Attempt the "Try It" problems at the end of each section before checking your answers.

4. The Economics of Discrimination

4.5. Try It!

Use a production possibilities curve to illustrate the impact of discrimination on the production of goods and services in the economy. Label the horizontal axis as consumer goods per year. Label the vertical axis as capital goods per year. Label a point A that shows an illustrative bundle of the two which can be produced given the existence of discrimination. Label another point B that lies on the production possibilities curve above and to the right of point A. Use these two points to describe the outcome that might be expected if discrimination were eliminated.