income, wealth and inequality

Question 1

income vs wealth and reasons for wealth differentiation in income and wealth

Answer 1

-income: flow concept measure over time
-wealth: stock concept: assets with market value that can gen income
-high incomes, assets, income, assets

-age: wealth accumulated over time, incomes, higher wealth with higher MRP
-education
-ownership of financial assets
-ownership of property
-wage differentials

Question 2

Lorenz curve and gini coefficient and how to work out

Answer 2

-lorenz curve: visual indication
-gini: mathematical indicator: section a/section (a+b)

-0 perfect equality
-1perfect inequality

-cumulative % of income and population

Question 3

poverty and types and causes

Answer 3

-absolute poverty: incomes below a threshold to access most basic , life sustaining goods and services
-relative poverty: income below a given average

-unemployment
-poor education
-poor health/healthcare
-wage differntials
-born into poverty
-tax cuts for well off

Question 4

equality vs equity

Answer 4

-eqaulity: equal distribution of income
-equity: fair distribution of income
-horizontal equity: equal treatment of equals
-vertical equity: rich taxed more

Question 5

national minimum wage, arguments and eval

Answer 5

graph: minimum wage horizontal
-monopsony, same but with MC and AC different

-incentive to work
-poverty alleviation
-reduce differntials
-fiscal ben
-better moral, higher prod

-elasticity: the more inelastic, less harmful
-youth lose out: low MRP
-those not on NMW may ask for rise in wages
-cost to businesses

Question 6

laffer curve and what it shows

Answer 6

-increasing taxes will increase revenue up to a point, beyond efficient tax rate, see a reduction in tax rev: disincentives, emigration, evasion
-tax revenue y and rate of tax on x

Question 7

policies to redistribute income with evaluation

Answer 7

1) taxation: progressive and regressive. incentives, big rev earners
2) benefits: universal and means tested. poverty trap gov finances
3)min/max wages: incentives and employment
4)legislation: anti-discrimination, hiring/firing, min wage. costs to businesses, enforcement, gov failure
5) gov spending on ed/training/healthcare. time, gov finances

Question 8

universal basic income

Answer 8

-wealth policy that guarantees a monthly income to everyone in population, regardless of income/employment

-supports those out of work
-overcomes means tested benefits. issue meeting criteria
-always an incentive to work. means tested benefits
-everyone eligible

can encourage laziness
-reduce labour market flexibility
high cost and poorly targeted

Question 9

wealth tax: pros, cons and eval

Answer 9

-tax on individuals net worth/assets, rather than income
-can be progressive and set at varying thresholds

-big revenue
-reduce inequality
-target windfalls
-promote efficient reallocation

-discourage investment
-risk of emigration
-tax loopholes
-admin challenges

-rate, assets, enforcement