Distribution of income and wealth Flashcards
(16 cards)
Wealth
A stock of assets
Wealth inequality
The unequal distribution of assets
Income
A flow of money received on a regular basis
Income inequality
When income is unevenly distributed across a nation
Lorenz curve
A measure of the distribution of income and wealth in a country
Gini coefficient
- A numerical value for inequality that is derived from the Lorenz curve
- Gini = A / (A + B)
Equality
The equal distribution of wealth and income in society
Equity
An acceptable distribution of income and wealth in society
Causes of income/wealth inequality
- Differences in education
- Wage differentials
- Unemployment / underemployment
- Ownership of assets/inheritance
- Welfare system
- Technological change
- Geographical factors
Pros of income/wealth inequality
- Higher rewards incentives effort and education
- Encourages investment and entrepreneurship
- Wages can reflect skills, demand and productivity
Cons of income/wealth inequality
- Reduced social mobility
- Lower aggregate demand as poorer households have a higher MPC
- Political/social instability
- Underutilisation of potential
- Welfare dependencies
Absolute poverty
Living below subsistence (the person is unable to meet their basic needs)
Relative poverty
A measure of poverty by comparison to the average in the country
UK relative poverty
Below 60% of the median income
Causes of poverty
- Unemployment/underemployment
- Lack of education
- Poor health
- Geographical/regional disparities
- Discrimination
- Conflict/corruption
Policies to alleviate poverty
- Progressive taxation
- Welfare benefits/universal credit
- National minimum wage
- Education/training programs
- Regional policy
