lesson 13: the distribution of income and wealth Flashcards
what do most economists agree that unregulated markets tend to produce? what is this a form of?
unequal distributions of income and wealth and this is a form of market failure
what is income? what is wealth?
income = flow of monies
wealth = stock of assets
in the uk is the distribution of wealth or income more unequal?
wealth
what are the two kinds of personal wealth?
marketable wealth = assets that can be bought and sold
non-marketable = cant be sold eg pensions
what are the causes of wealth inequality?
inequality of income - low earners struggle to save
age - older people more time to save
inheritance
saving patterns
luck
what are the three forms income can be broken into?
total original income
gross income
disposable income
what is total original income?
before tax and benefits
what is gross income?
original income + benefits
what is disposable income?
gross income after tax
what does robin hood policies include? whats its aim?
progressive taxation + transfer payments
reduce inequality and poverty
what is used to measure inequlity?
the gini coefficient
what does the lorenz curve show?
the extent the distribution of income or wealth is equal or unequal
whats the formula for the gini coefficient?
shaded area A / total area of BCD
how much has the uks gini coefficient increased in ten years?
0.25 —> 0.35 inequality is on the rise
what are causes of income inequality?
unequal holdings of wealth - wealth generates income
household composition - some have more workers some have more pensioners
different qualification levels - some are more highly skilled = higher demand = higher wages
educational opportunities - graduates tend to earn more in their lifetime
discrimination - may hold some groups back
what percentage of high court judges are from private schools?
70%
when do we consider it poverty?
when you earn less than 60% of the average
what are policies to reduce inequality in society?
minimum wages
robin hood policies (p tax + t payments)
increasing quality of education
when does market failure occur?
when resources are not allocated efficiently
