Inequity Flashcards
What is income?
The amount of money received over a set period of time.
What is wealth?
The value in money of assets held
What does a greater wealth/income allow for?
Purchase of a greater amount of goods and services.
What are the views on differences in income and wealth?
Many people view differences in wealth and income as unfair, especially if they are significant.
What occurs in economies with high levels of inequality?
High levels of inequality and wealth distribution can lead to people who are starving whilst others have very high levels of income and wealth.
What is inequality caused by?
- Wage differentials
- Discrimination
- Regressive taxes
What is the general trend of those in a poor family?
Those born into a poor family will remain poor because they won’t have the income and wealth needed to improve their situation
Why does the general trend of those in poor families exist?
• Inequality can lead to differences in access to resources.
People with a very low income may not be able to afford vital resources and services such as education. Lack of education may lead to continued low income due to a struggle to find a good job. People with higher income and wealth will be able to afford the best education and therefore improve their prospects of income in the future.
How does market failure affect distribution of income?
- Argued that the unequal distribution of income and wealth is a consequence of market failure.
- Free market has led to this inequitable distribution of income and wealth.
- As a result, the redistribution of income and wealth would lead to an allocation of resources that would increase benefit to society, and society’s overall happiness.
How does inequality of income affect market failure?
Inequality is a cause of market failure.
• If some people do not have the income and wealth to pay for necessities, then resources won’t be allocated efficiently.
How is market failure via inequality corrected?
Government intervention.
How do governments affect inequality of income?
• The level of redistribution undertaken by governments is a political decision based off of value judgements, it is up to them how much they redistribute income and wealth.
How does redistribution of income affect equality?
- Redistribution of income arguably reduces the incentives for firms and individuals to work hard
- These incentives are needed to encourage efficiency within the market, and not having them may cause further market failure.
