FOR PROF. FARELL ONLY

Service innovation can be confused with process innovation. If the innovated process directly affects the customers in the service industry it is a service innovation. If the effect on the consumer is indirect e.g. due to reduced prices as a result of lowered cost of production in the good it is a process innovation. Chester Carlson’s development of the photocopier is another example of process innovation as it could produce numerous copies in a short time at a time when carbon copying in typewriters was the farthest one could go in producing multiple copies.

A categorization of innovation by its radicalness includes radical, architectural, modular and incremental innovation in an increasing order. The existing technology consists of components, which then make up the system. The level of innovation depends on how it impacts the components and/or the system.

a) Incremental

It is characterized by an increase in the component knowledge thereby innovating the working of a particular component. In a washing machine, an incremental innovation is an increase in its spin speed. Here, innovation has been performed on the spinner. Addition of faster acting enzymes in detergents is another example.

b) Architectural Innovation

It affects a number of components in a way that changes the working of the system. Traditionally, washing machines had different tubs for the washer and spinner. The innovation that put the spinner and washer in the same machine making the washing machine automatic is an architectural innovation.

c) Modular Innovation

Modular innovation uses the same core concepts of the existing technology and then inverts the concepts of the component working to produce an innovation that has new components. An example is the clockwork radio, which differed from the existing radio by not requiring a power source.

d) Radical Innovation

Radical innovation is very rare and almost akin invention. It overturns the concepts of the working of components as in modular invention and then changes the entire system such that the final product is unique and apart from using similar concepts completely unlike the existing technology. An example of this is the innovation of the television.

2. Explain how these two types of innovation were used to drive up profits.

a. Discuss the 2 key factors required to drive up profits – drive down costs and drive up revenues.

b. Might want to include how new products gain customer acceptance, including the importance of the relationship between price and utility.

Profit is a function of total revenue and total cost. To increase profits therefore, the firm has to increase the total revenue without increasing the marginal cost or to reduce the total cost of production by reducing the marginal cost so as to increase the level of equilibrium output.

c. Process innovation is often used to get leverage on lowering costs, might want to discuss how impacts total product, ATC, and profit.

d. Some of the process innovations of Wal-Mart might be good to look into.

TR=P*Q

Product and service innovation increases the demand for a product or service. An increase in demand means an increase in the total quantities sold thereby increasing the total demand. Kellner’s coach travel innovation increased the total revenues by dramatically increasing the number of passengers using air travel.

In the initial periods of a product’s innovation, if the innovation is radical and before other companies follow suit, the firm is specializing and can increase the price of the good, which also serves to increase the total revenue.

iii. Explain how our ability to do process and product innovation might be impacted by a slow growth / no growth economy, and what we can do about the problem.

1. How is innovation impacted during times of slow growth or no growth?

2. May have to consider what is required to actually deliver innovations to the market.

c. Explain Diffusion.

i. Define it,

ii. Explain how it works,

iii. Give 3 examples involving firms that have lead diffusion of some innovation and why these represent good examples of diffusion,

iv. Discuss how diffusion might be affected by a slow growth / no growth economy.

1. Since diffusion is not free, how might it be impacted by economies that are not growing or only growing slowly?

Diffusion is the spread of an innovation to other products or processes through imitation. Other firms in a bid to keep up with the shift in demand imitate the technology of the innovating company and in so doing the innovation spreads to the entire industry. The imitation in the car industry is done by de-assembling an entire vehicle to discover differences in architecture and copying the architecture. The legality of imitation of innovation enhances the speed of diffusion.

In a slow growing economy the rate of diffusion is slower. Companies have to invest in imitating the product and must be assured of the consumer demand and since demand grows slowly in such an economy companies may be unwilling to imitate the innovation instead waiting for the consumer demand to grow considerably before taking the plunge.

d. You work for Mr. Elon Musk and he has asked you to explain how his company can determine its optimal level of R&D spending.

i. Please explain the general concept of optimal level of R & D spending

ii. Explain the marginal cost and marginal benefit components

Tesla spends a large amount on R &D that results in its registering large losses with a loss of 689 million dollars in the last financial year. The optimal level of R & D spending for a company depends on the interaction between the marginal benefits the company expects to flow out of inventions and subsequent patents in this area and the marginal costs of R & D. The optimal level of R&D spending is where MB=MC. The calculation is however more complex in R7d than in product spending since the marginal benefits are a forecast that may never be attained and the costs include the opportunity costs of finances.

1. You have a good list of items in the slide set – just need to provide explanations of the items.

The marginal cost of R&D spending is the additional cost incurred in an additional dollar spent in R&D. The cost of funds invested in R&D are the opportunity cost and interest rates depending on the sourcing of the funds.

In the case of bank loans, personal savings and bonds, the cost of funds is the market interest rate therefore

MC= interest rates

For retained earnings the cost of funds is the opportunity cost forgone if the money were used in production. For simplicity, the opportunity cost is ignored and the marginal cost is the market interest rate. The market interest rate is assumed to be constant.

The marginal benefit or the expected rate of returns is the expected profit from the last dollar incurred in R&D.

The optimal level of spending in R& D is therefore where;

Market Interest Rate= Expected Rate of Returns

iii. Explain how the optimal level of R & D spending is computed.

1. Feel free to use graphs to support your explanation.

2. Don’t forget to let him know that returns are expected, not guaranteed.

2. Technology, R & D, and Efficiency.

You are a business manager for Coca Cola and some new competitive soft drinks are being introduced with great customer acceptance.

a. Explain to your boss the fast second strategy.

The fast second is a strategy companies use to catch up with a competitors increased demand due to an innovation by copying and advancing this innovation. Since innovations cannot be patented, the fast second strategy is within the law.

b. Why and how Coke would use the fast second strategy to increase its economic profit

i. Discuss the why

ii. Discuss the how

iii. List and discuss 2 examples.

Companies often make the mistake of assuming that a new innovation will phase out, as AT&T did with the packet switching technology that was crucial in the development of the internet, a market it greatly lost to. Coca-Cola being the most popular and profitable soft drink should not make the same assumption and should adopt the fast second strategy. The fast second strategy has its advantage in a reduced cost of innovation. Since Coke is imitating, it uses lesser funds than did the parent company that invested more in trials and errors.

Coca-Cola has more R&D disposal than all other soft drink companies it could therefore develop this innovation to a radical stage where it can increase revenues and at best be recognized as an invention, which can be patented ensuring economic gains for at least 20 years.

c. Explain to your boss how Coke can use the protection provided by patents, copyrights, and trademarks to increase their economic profits.

i. Discuss what each of the 3 protections apply to, and

ii. Discuss how each will help a firm achieve economic profits.

A patent is an exclusive right that gives the recipient the right to manufacture, sell, or otherwise control an invention for a period of 20 years from the date of the grant. Patents are given for inventions. Patents in the production of a good or provision of a service establish a monopoly for the company. This is characterized by higher prices than would be I a competitive market and sole servicing of the consumer demand. It therefore increases economic profits by increasing total revenue. A copyright on the other hand applies to artistic work. It gives the owner the exclusive right to reproduce and sell his artistic work (art, music, films etc.) or published work during the owner’s lifetime and 70 years after death. The economic benefits of a copyright are clear, it increases the total revenue flowing from the purchase of these works.

A trademark is a phrase or symbol that differentiates a company. Trademarks can be issued for the company’s logo, slogan or jingles. A trademark or trade name is a determinant of brand equity. Coca-Cola is one of the world priciest trade names. A trade name increases profits for Coca-Cola by preventing companies from using its logo to sell soft-drinks to consumers who trust coke. It ensures all the soft drinks sold under the coke logo are Coke’s, increasing the quantity of its soft drinks sold and therefore the total revenue and profits. Coca-Cola can use its brand name to increase profits in the fast second strategy. Since it already has the recognition, image and therefore equity all it lacks is its competitors’ innovation. Once it innovates its product Coca-Cola cashes in from innovations by its competitors more than they do giving it a perpetual advantage in the soft drink market.

d. Explain to your boss how Coke can use their Brand to increase their economic profits.

i. Discuss the following and each can be used to increase a firm’s economic profit:

1. Brand-name recognition

2. Brand equity

3. Brand promise

4. Brand personality

Brand equity is the distinguishing effect of the brand knowledge on consumer’s response to the brand’s marketing. A brand’s equity could be positive or negative. A brand has positive equity if consumers react more positively towards products carrying its name than they would to the same product if it were not associated with the brand. The brand equity is a resultant of the brand awareness and the brand image. A brand’s awareness is almost synonymous to the brand name recognition and is basically how easily the regular consumer can recognize it. A brand’s image consists of the brand associations, brand promise and brand personality. The brand promise is what the brand stands for and assures consumers it will deliver. A brand’s promise from the consumer’s view point is its advertising catchphrases and slogan. Brand personality is the notion that consumers have of the brand in “personalized’ terms. A brand may have strong equity but have a negative brand personality. For example consumers think of Starbucks as an impersonal conglomerate stealing business from local coffee houses, Starbucks however still has strong brand equity due to brand awareness and brand imaging.

e. Explain to your boss how technological advance increases productive efficiency and allocative efficiency.

i. Discuss the impact of technological advancements on productive and allocative efficiency.

Advancements in technology result in greater productivity of machinery. This increase in productivity comes at little added cost (usually just the cost of changing to the new technology). An increase in productivity of machinery means a decrease in the Marginal Cost which raises the equilibrium level of output. This is reflected in the product market by an increased quantity of goods produced and for the same demand schedule, the price of the good reduces to equate MR (p) to MC. Technological advancements therefore increase the efficiency level in the product market. In the resource market, firms increase their demand for machinery with greater productivity thereby increasing efficiency. With the same level of capital, firms will need to reduce their demand for substitute resources, usually labor, in the short run. In the long run however, with an increase in total revenue, the firm can employ more labor and machinery thereby eliminating idle labor and increasing allocative efficiency.

3. The demand for resources

a. You are an Economics teacher. Please explain to your class the significance of resource pricing on resource allocation among:

i. Firms and industries,

Significance of resource pricing on resource allocation in:

Resource pricing is the determination of the price of scarce resource based on its demand and supply in a capitalist economy or as set by the central authorities in a socialist or communist economy.

Resource pricing determines the cost of production in firms and industries.

Resource pricing determines the allocation of resources in firms and industries. In a free market, resources are allocated to the industry with high profitability.

ii. The determination of income,

iii. Include the impacts on the ability of a firm to achieve cost minimization.

Resource pricing determines the general income levels of households flowing in as expenditures from the resource market. From the circular model of a four entity economy, expenditure from firms flow to households in form of wages, interest and dividends and rent. Resource pricing determine the income distribution in a society, if resources allocated to high cost it will worsen the living standards of the poor and create a cycle of poverty.

1. Discuss how resource prices affect the ability of firms in an industry relative to their ability to acquire resources and the subsequent impact on output,

A firm’s ability to acquire resources relative to the industry depends on the market structure of the resources demanded by the industry. Industries with a perfectly competitive resource market exhibit the characteristic of being price takers. The subsequent impact on prices is a product market tending towards perfect competition. The scarcity of the resource also has an impact on the ability to acquire the resource. Demand from certain specialists increases the wages for this class of laborers and increases the cost production and hence the price. In extremes it can create barriers to entry in the industry resulting in a monopoly in the product market.

2. Discuss the impact of resource prices on the determination of income that results from the sale of those resources.

3. Discuss the impact of resources prices on the ability of firms to minimize costs.

b. Explain to the class the marginal productivity theory of resource demand and why businesses care about it.

i. State the assumptions

The marginal productivity theory of resource demand examines the firm’s conditions for employing resources in the assumptions of a perfectly competitive resource market and a perfectly competitive for its product.

ii. Explain MRP and MRC, and the firms’ rule for employing resources

iii. Be sure to explain the terms and what they mean to a business.

The Marginal Revenue Product (MRP) is the change in the total revenue arising from the increase of a single unit of a given resource/input. The input should be divisible into singular units

MRP= Change in Total Revenue

Change in Resource Quantity

The Marginal Resource Cost is the change in the total in the total cost of producing the product resulting from an additional unit of a given resource.

MRC= Change In Total Resource Cost

Change in Resource Quantity

From the above formula, it is clear that the MRC is the cost of a single unit of resource. A firm will continue to employ additional resources as far as the revenue generated by the additional unit of resource exceeds the cost of employing the resource.

A firm sourcing its resources from a perfectly competitive market and selling its products in a perfectly competitive market will generate maximum profits from the resources employed at the point where MRP equals MRC. The MRC functioning increases gradually while the MRP which is subject to the law of diminishing returns (when at least one input is fixed and another is variable an increase in the variable input increases the total output in a reducing manner until a certain point where output remains experience)

MRP=MRC (firm’s rule for employing resources)

c. The determinants of resource demand.

i. Discuss the 3 determinants of resource demand

1. Changes in product demand

Changes in product demand are directly proportional to the changes in its resource demand. A decrease in the product demand will result in a decrease in demand of resources used in it its production and vv.

2. Changes in productivity

An increase in the productivity of labor or machinery results in an increase in its demand as it reduces the cost of production. Changes in productivity result from technological advances, making machinery and the labor handling the machinery produce greater output. An increase in the quality of the variable resource is the other factor. In the case of labor, increase in levels of education and training in the new labor pool makes it more productive.

a. Quantities of other resources

b. Technological advance

c. Quality of the variable resources

3. Changes in the prices of other resources including:

a. The case of substitute resources – the substitution effect and the output effect

b. The case of compliments

In the Case of substitute resources the change in price of a substitute resource results in substitution and output effects. In an industry using labor and machinery and one can be substituted for another; a reduction in price of labor results in the substitution of machinery for labor in what is the substitution effect.

A reduction in the price of labor will result in the reduction in the cost of production, the equilibrium output therefore shifts upwards requiring the firm to increase its production to meet the equilibrium output resulting in the employment of more labor. This is the output effect.

For the case of compliments a reduction in price of one resource results in the increase of its demand, since the complement is required to utilize the initial resource, its demand also increases. The reduction in the price of a complementary good therefore results in the increase in demand of its complement.

4. The demand for resources.

a. Please thoroughly explain the determinants of the elasticity of resource demand.

The elasticity of the demand for resources is the measure of responsiveness of quantity of resources demanded to changes in price.

Ε= % change in quantity of resources

% change in resource price

When a small percentage change in price of the resource results in a larger percentage change in the resource quantity; E> 1, the resource’s demand schedule is highly elastic

When a large percentage change in price results in a smaller percentage change in the resource quantity; E<1, the resource’s demand schedule is inelastic. If the % change in resource is equal to the 5 change in resource quantity; E=1, the resource has a unitary demand schedule.

i. Discuss the following:

1. Ease of resource substitutability

The more substitutes a resource has the more elastic it is. A resource with no substitutes will exhibit an inelastic demand curve.

2. Elasticity of product demand

A resource with a highly elastic product demand will have a high elasticity of demand. A highly elastic product cannot afford increases in prices and therefore a small change in the resource price will result in its being substituted or plainly reduced to maintain the cost of production.

3. Ratio of resource cost to total cost

As the ratio of the resource to the cost increases so does its elasticity.

b. Please explain how a firm would determine the optimal combination of resources required to produce a given level of output.

i. Discuss / explain.

The optimal combination of resources is that which minimizes cost at the determined output level that maximizes profit and maximizes the total profit.

The least‐cost rule is used to determine the least cost combination. It states that costs are minimized when the last dollar spent on each resource yields the same marginal product. In the case of labor and capital costs are minimized when:

Marginal Product of Labor = Marginal Product of Capital

Price of Labor Price of Capital

The combination that maximizes profit is determined by the profit- maximizing rule, which states that the marginal revenue product should equal the resource price (assumption of perfect competition)

Marginal Revenue Product of Labor = Marginal Revenue Product of Capital

Price of Labor Price of Capital

5. Government Regulation of business:

a. List and explain 4 reasons in favor of federal government regulation of business and 4 reasons against federal government regulation of business. Include the economic consequences of each for the economy and you individually.

i. You should be able to provide this. Might require a little research.

Pros

i. It helps guarantee minimum standards e.g. of consumer protection thus consumers don’t have to live in fear of false advertisements and can be assured of quality products thus boosting the economy.

ii. It helps to protect the weak against the strong e.g. small companies against larger companies or groups of companies that work together to fix prices therefore encouraging emergence of small businesses thus boosting economic growth.

iii. It helps to provide benchmarks of good practice for business to set as minimum standards for example minimum wage for employees helps to ensures that no employee receives a salary lower than the minimum wage thus discouraging unfair play by employers, this therefore encourages more people to take up jobs and hence boosting the economy.

iv. It helps to provide an appropriate framework for ethical business behavior thus discouraging inappropriate behavior from employers towards employees or the other way round, thereby creating a safe workplace thus encouraging more people to seek jobs thus boosting the economy.

Cons:

i It discourages foreign investments since there are high costs involved in starting a business in America thus discouraging economic growth.

ii. It encourages shifting of businesses from America to other parts of the world where labor is cheaper thus reducing job opportunities for Americans hence reducing the pace of economic growth in America.

iii. It makes it hard to start a business since there is such a long process involved, this discourages young entrepreneurs from investing thus stagnating economic growth.

iv. It has limited the number of opportunities entrepreneurs can venture in to thus discouraging economic growth.

b. Explain why the effectiveness of antitrust laws changes through time.

i. Discuss the role of politics and elections

Antitrust laws were created in order to boost healthy competition among producers in the economy, there have been however many developments since the first antitrust law was put into practice. This changes include for example technological changes thus in order to curb with this changes other antitrust laws have been put into place in order to promote fair play in the business competition, in this upcoming general election the democrats are fighting to push through a person who will ensure antitrust laws are adhered to while the republicans are fighting to push through someone who will be a bit softer on antitrust laws.

c. Explain Industrial Regulation (purpose, problems, and economic impacts) and Social Regulation (purpose, problems, and economic impacts)

i. Pretty straight forward

i. Industrial regulations: there are various regulation put in place in order to help regulate competition in industries thus foster healthy competition and encourage economic growth, however there are various problems which face the government when trying to regulate industries such as a large number of participants in an industry thus difficult to regulate. However the government is fighting this problems in order to put industries into perspective.

ii. Social regulation: this regulations are aimed at preventing any dangers posed by producers from reaching the consumers, there are various regulations put in place to protect the public or rather consumers, for example false advertising regulation which prohibit producers from giving false information while advertising, there are various challenges which face this regulations for example there is a thin line in consumer preferences thus it’s difficult to come up with regulations which serve every consumer. This regulations help to boost the economy since consumers can purchase gods and services freely with the knowledge that they are protected.

6. Income inequality

a. Please explain the factors that have contributed to increased income inequality since 1969,

i. Discuss each of the following as it contributes to increased income inequality.

1. Greater demand for high skilled workers

2. Demographic changes

Demographic changes: there has been a growth in the number of people seeking jobs over the past years while the number of jobs available or created each year have not managed to keep up with the growth population of people seeking jobs thus leading to increased income inequality.

3. International trade, immigration, and the decline of unionism

i. Globalization: low skilled American workers are losing their jobs to cheaper low skilled foreign workers thus putting them out of jobs.

ii. Demand for highly skilled workers: the development in technology has led to increased demand for highly skilled workers who are able to keep up with the advancements in technology thus facing out uneducated Americans.

iii. Immigration of less educated workers: less educated foreign workers have brought about competition since they offer quality labor at the same price thus are more likely to be employed than American laborers.

iv. International trade and decline of unionism: there has been a significant reduction of influence by unions thus causing company’s profits to be unevenly shared thus increasing income inequality.

4. The great recession of 2007

The great recession of 2007: during this period of time thousands of Americans lost their jobs and were put out of work this thus caused a significant contribution in income inequality

5. Any other factors that you can identify

b. What are 6 results of the growing income inequality in America and what can we do to correct this growing problem?

i. For each of the items listed above, discuss what might be done to eliminate the problems that cause growing income inequality

i. Likelihood of financial crises occurring: income inequality was among the causes of the great depression thus if the gap still continues to grow it increases the probability of another financial crisis occurring. This can be solved by passing laws that protect employees.

ii. Aggregate demand: increased income inequality leads to a reduction in the amount of demanded products by the middle class thus leading to a reduction in production hence decreased employment opportunities. This can be solved by encouraging formation of unions.

iii. Increased debt: income inequality causes increased debt by the middle class since the income is not enough to afford some luxury items they might end up being buried in debt in order to keep up with a certain lifestyle. This can be solved by encouraging financial awareness.

iv. Monopolization of labor: Due to decreased income the middle class limits itself to basic items and this cause’s decreased production thus causing stiff competition which causes emergence of a monopoly. This can be solved by passing laws that limit formation of monopolies.

v. Competition: stiff competition might arise due to rise decreased demand caused by increased income inequality. This can be solved by passing laws that encourages friendly competition.

vi. Increased crime rate: income inequality leads to increased crime rate since some people might venture into crime in order to solve their money problems. This can be solved by encouraging financial awareness.

c. Explain how discrimination reduces domestic output and income,

i. Look at the items under Discrimination in the notes and discuss how each contributes to the reduction of domestic output and income.

Discrimination is considered a labor market failure, it’s effects to reduce labor supply to a given job thus cause an increase in pay and increase labor supply to other jobs thus suppress their pay.

It causes reduced productivity among employees since the employees discriminated against do not have a motivating factor to make them work hard unlike every other employee, this therefore causes reduced stamina in work and hence poor quality output.

d. Explain the difference between Social Insurance Programs and Public Assistance Programs, and give 3 examples of each.

i. Social Insurance

1. What is it?

Social insurance is defined as a program whose risks are transferred to and pooled by an often government organization legally required to provide certain benefits.

Examples of social insurance programs are:

a. Old-Age, Survivors, and Disability Insurance (OASDI): this program offers financial help when one is disabled or of old age i.e. has retired.

b. Unemployment Insurance: this program offers financial assistance when one is fired from a job thus giving him/her something to get them by.

c. Temporary disability insurance: this program offers assistance to individuals when they are temporarily disabled.

2. Explain the 3 examples relative to what they do for the beneficiaries of each program.

ii. Public Assistance

1. What is it?

Public assistance programs or commonly referred to as welfare programs are government sponsored programs which aim at helping certain individuals in the community who are poor. Examples of welfare programs are as follows:

a. Temporary Assistance for Needy Families (TANF): This program offers help for families in need to become self sufficient

b. Supplemental Security Income (SSI): This program offers help to people of special groups specifically the aged, blind and disabled. It helps them get basic needs.

c. The Earned Income Credit (EIC): This program refunds tax for low income households.

2. Explain 3 of the examples relative to what they do for the beneficiaries of each program.

e. Discuss the pros and cons of reducing spending on these two types of programs relative to stimulating economic growth.

i. Some Google research should help with this.

Pros:

i. It’s an effective way for the government to attend to the needs of the poor: through this programs the government is able to cater to the needs of the poor effectively since they can give service directly.

ii. It can help the poor in many ways: through this programs the government is able to cater to various categories of poor people in the society and be of some assistance to them in many aspects.

iii. It can guide and help people towards the right path: since they know they won’t be on the welfare program forever it thus encourages those people to work hard to make a better path for themselves.

iv. It’s a great initiative: A country is judged by how its poor people are treated thus this programs become a source of national pride.

Cons:

i. It has micro level implications: It’s prone to being taken advantage of by lazy individuals who don’t see the need to work for a living.

ii. It may not be that helpful: People under welfare do not receive large sums of money which they can use to make something of themselves but rather receive only little amounts of money which makes them come back for more every time.

iii. It might lead to abuse: Some people have been found to have lied about their status since they have become too dependent on the welfare fund which should not be the case.

iv. It might not be able to sustain long term support: this is because this funds are meant to help poor people build a way for themselves to get better opportunities in life.

7. On the subject of Poverty

a. Define poverty – check definition in notes, check google as well

Poverty refers to the state of having little or no money, goods or means of support.

b. Explain 5 factors that have contributed to the significant increase in the number of people in poverty today.

1. A bit of Google research should provide additional information.

Poor Economy. This has increased unemployment. Some companies have had to lay off their employees or even close their business. Others have decided to move their companies overseas so as to save money by employing foreign workers for lower wages. All because of the economy. Unemployment does not only affect individuals but their families as well which drives these families to poverty.

Drug Use. Drugs are highly addictive. For this reason one can use all his/her money in drugs. It can also affect one in many other ways. A person may skip work resulting in reduced wages and sometimes a person may lose job opportunities for the same reason. A person could also pay high hospital bills due to drug related illness. These reasons could easily lead users to poverty.

Lack of Education. A lot of people from the lower class cannot afford to attend college and earn a degree. Such people can only get low paying job yet they have to support their families and themselves with the little income. This slowly leads the people to poverty.

Medical Bills. People develop severe illnesses which require immediate treatment. Many appear abruptly and require long stays in hospitals, expensive drugs and even surgery. All these result in huge bills which can easily lead families to poverty.

Lack of Affordable Housing. The gap between wage earnings and the cost of housing has left many unable to make ends meet. This easily drives families and individuals to poverty.

c. Explain 5 things that need to be done to significantly reduce the number of people in poverty going forward.

1. Should be able to create some good ideas.

Raising the Minimum Wage. This would mean that people end up with more money in their pockets which would mean they would have money to afford a better life hence reducing poverty.

Paid Leave and Sick Days. This would protect employees who take time off to look after their newly born babies, to recover from illnesses or take care of their family members who are sick from falling into poverty.

Increase Employment. If unemployed people get employed they would be able to take care of themselves and their families.

Immigration Reform. Undocumented workers have limited work options and are easily exploited. Their families are the most likely to end up poor. With reforms they will be able to get good jobs.

End Mass Incarceration. The war on drugs and police targeting young black and brown men have wreaked havoc on African American and Latino families removing them from the workforce. Many employers refuse to higher people with even minor criminal records.