1. Income and Wealth: Poverty and Inequality - Reasons for Distribution

Question 1

What is income?

Answer 1

A flow concept measured over a given period of time

Question 2

What is wealth?

Answer 2

A stock concept measured at given point in time - what is the value of your assets

Question 3

What are assets?

Answer 3

Anything with a market value that can also generate income

Question 4

Why are the concepts of wealth and income ‘mutually reinforcing’ (related to each other)?

Answer 4

Those with a high income can spend surplus income on assets to improve wealth. Those who are wealthy are likely to have high incomes

Question 5

What are the reasons behind differentials in incomes and wealth?

Answer 5

1. Age2. Education3. Ownership of financial assets4. Ownership of property5. Wage differentials

Question 6

How does age affect wealth and income?

Answer 6

Older ppl have generally acquired more skills and have more experience - this allows them to demand higher wages creating greater income which will in turn create wealth

Question 7

How does education affect wealth and income?

Answer 7

Those with more qualifications etc have higher earning potentials than those with less - higher potential income & wealth

Question 8

How does ownership of financial assets or property affect wealth and income?

Answer 8

Those who are able to buy financial assets, like shares, or property, like houses, will be far more wealthy in the long-run as prices rise. - inheritance makes this worse in l-run

Question 9

How do wage differentials affect wealth and income?

Answer 9

Wage differentials in labour markets will create difference in peoples incomes and eventually there wealth levels - gov. involved here to reduce inequality through the benefits system