2.7 Inequality

Question 1

What is the Difference Between Income and Wealth

Answer 1

Income is the flow of earnings, usually from work or investments.
Wealth is the accumulation of assets (property, savings, investments).

Question 2

What does distribution and inequality refer to ?

Answer 2

Distribution and Inequality refer to how income and wealth are spread across a population, and how uneven this distribution may be.

Question 3

Why is a more even distribution of income a policy objective?

Answer 3

A more even distribution reduces poverty, promotes social cohesion, and can lead to more sustainable economic growth.

Question 4

What is the difference between absolute and relative poverty?

Answer 4

Absolute poverty refers to a condition where individuals cannot meet basic needs like food, shelter, and clothing.
Relative poverty is when individuals are considered poor in comparison to the average standard of living in their society (Below 60% of median household incomes)

Question 5

What is the Gini coefficient, and how does it measure inequality?

Answer 5

The Gini coefficient is a number between 0 and 1 that represents income inequality. A value of 0 means perfect equality, and 1 means perfect inequality. Relevant quantiles show the share of income held by different segments of the population (e.g., top 10%, bottom 50%).

Question 6

What does the Lorenz curve show?

Answer 6

The Lorenz curve is a graphical representation of income distribution, showing the percentage of total income earned by cumulative percentages of the population. The more bowed the curve, the more unequal the income distribution.

Question 7

Causes of Inequality

Answer 7

Distribution of Wealth, Education, Trade Unions, Ageing Population, Government Intervention

Question 8

Consequences of Inequality

Answer 8

Poor health, reduced economic mobility, lower quality of life, and potential social unrest.