hot topic: inequality

Question 1

what are the 2 types of inequality

Answer 1

• income
• wealth

Question 2

what is an example of income inequality

Answer 2

the average american CEO was paid 271 times more than the average worker in 2017

Question 3

what does the Y and the X axis represent on the Lorenz curve

Answer 3

• the Y axis represents cummulative % of income
• the X axis represnets cummulative % of population

Question 4

what is wealth

Answer 4

a stock of assets

Question 5

4 factors that influence income inequality

Answer 5

• minimum wage rates
• assortative mating
• progressive tax( allows for social benefit payments)
• inheritance(the “r>g” hypothesis)

Question 6

what are the 2 ways that minimum wages decrease inequality

Answer 6

• increases income for the lwoer income earners
• increases costs for businesses so CEO’s earn less

Question 7

describe how assortative mating lead to income inequlaity

Answer 7

• people who are successful usually marry each other
• leads to increase in opportunities for children( private schools + inheritance of skills and talents)
• increasing inequality

Question 8

what are the figures that the GOV gives out as benefits(2)

Answer 8

• £ 1.7 billion to unemployed(JOB SEEKERS ALLOWANCE)
• £ 160 billion as pensions

Question 9

what is progressive taxation

Answer 9

higher income earners pay a higher percentage of their income on tax compared to workers with lower percentage incomes

Question 10

what is the r>g hypothesis

Answer 10

where rate of return of wealth (r = 5.3/year) is greater than the rate of increase of incomes(g = 3.8%/ year)