Distribution of wealth & inequality

Question 1

income

Answer 1

flow of earnings of an individual or household

what you earn

• a flow concept ~ money generated from wealth ( wages, rent)

Question 2

wealth

Answer 2

stock of financial assets

what you own

• a stock concept ~ assets owned and human wealth

Question 3

distribution of income and wealth

Answer 3

looks at difference for individual/ households geographically, occupationally and gender…

an individuals ability to consume g/s depends on income and wealth

an unequal distribution may result in an unsatisfactory allocation of resources

Question 4

factors influencing distribution of income : wealth

Answer 4

• accumulation of assets provides people with a stream of income in future
• shares ~ capital growth if share price rises and income growth through dividends
• property ~ capital growth through house price appreciation and income growth through rent
• ownership of capital ~ profit
• savings provide interest

Question 5

factors influencing distribution of income : human capital

Answer 5

• skills, qualifications and experience of a worker based on value to a firm
• skilled workers ~ wage in elastic ( bid up )
• increase HC by attaining higher educational qualifications, training, experience in work

Question 6

factors influencing distribution of wealth : income

Answer 6

• increase in income will have direct impact, providing the finance for investment
• investing in productive capacity of economy will increase stock of physical assets - lead to EG and higher future income

Question 7

factors influencing distribution of wealth

Answer 7

inheritance : born into wealth and are left wealth by relatives

income : as income rises, peeps are more willing able to acquire wealth

marriage : marry into wealth

Question 8

consequences of income and wealth inequality

Answer 8

• more unequal distribution ~ alienation of poor ~ increase in poverty and associated problems (crime, reduced happiness)
• income may be redistributed back to higher earners with increased savings & wealth
• may be increased investment as returns for entrepreneurs improve

Question 9

how can distribution of I & W be achieved through gov taxing and spending

Answer 9

TAXATION :

• progressive tax ~ increases proportion of tax as you earn more
• regressive tax ~ decrease proportion of tax as workers earn less

GOV SPENDING :
- allowance that redistributes income to less well off through welfare benefits

Question 10

absolute poverty

Answer 10

when a household doesn’t have sufficient income to sustain even a basic acceptable standard of living

Question 11

relative poverty

Answer 11

a level of household income that is considerably lower than the median level of income within a country