T7 - distriubution of income and wealth Flashcards
what is income
the flow of money a household recieves in a particualr period of time
what is wealth
everythign someone has that has value and can geenrate income
what is the distribution of income/wealth
how income/wealth is divided between different groups in society
factors affecting DOI
Government
Wealth inequality
Levels of skills
Number of unemployed per household
DIfference in earnings
0 Hour contracts
Globalisation
Discrimination
Source of monospony power
Age
Pensions
Why do wage differentials occur
As of different elasticites in different proffesions
Factors infleucning distrubtion of wealth
Ability to benefit from capital gains
pensions
Inheritance
Asset prices
Ability to save
Pension
level of incomes
WHat is equality
everoen is treated equally and incoem divided equally
what is equit
everyoen treated fairly for what they do
what is the gini coefficient
meaasure of incoem inequality
Between 0 and 1
higher = more inequality
what is the lorenz curves
how incoem is distributed amonst the population
how to calcualte the gini coefficient
Area between lorenz curve and line of equality/Area calculetd above + area below lorenz curve
arguments for incoem inequality
creates incentives
trickle down affect
rewards hard work
reawrds risk and investment
fair
consequences of incoem inequality
unfair
homelessness
can lead to poverty
impact on ad
lower standards of lviing
explain the lorenz cuve
population is split into quintiles
richest quntile is 20% of households with highest incomes
shows how much x% off pop get
what is horziontal equity
identical treatement to people in idetical situations
what is vertical equity
people with higher incoems pay more tax
examples of vertical equite
progessive adn proportional taxes
cons of wealth inequality
unequal dist of proeprty
asset bubbles
impacts wealth inequality
can cause people to be lazy
unfair opporuntities
greater inequality in recessions
only wealthy can take risks
wealthy have added secruity, regardless of incomes
are the cons of incoem and wealth ineuality mutally exclusive
no
how does ienqualtiy cause higher asset prices
higher incomes
peoplewant to buy more assets to icn wealth, better security
leads to inc demand at top fo market
due to assets being scarce, deamnd is excess
causing higher prices
prices unlikely to lower as most assets are inealstic in supplu
