The distribution of income and wealth Flashcards
wealth d
a stock of valuable assets
marketable wealth d
wealth that can be transferred to others
non-marketable wealth d
wealth specific to a person, which cannot be transferred
distribution of wealth d
how wealth is shared out between the population
income d
a flow of money to a factor of production. An individual’s income may include wages and state benefits
distribution of income d
how income is shared out between the factors of production
examples of marketable wealth
property, cash, shares, art
examples of non-marketable wealth
life assurance and pension fund holdings
who does wealth tend to be skewed towards
older age groups
what are the four main sources of wealth
inheritance
saving
entrepreneurship
chance
what are the causes of wealth inequality
inheritance
marriage
income inequality
chance
what is more equally distributed, income or wealth
income
the greater the degree of inequality, the _____ the curve will be below the ____ ____ line
further
45 degree
what are the axes on the Lorenz curve
x : % population
y : % of income
Lorenz curve d
a diagrammatic representation of income and wealth
Gini coefficient d
a statistical measure of the degree of inequality of income or wealth
what would the Gini coefficient be under perfect equality
0
what would the Gini coefficient be under perfect inequality
1
why has distribution of income become more unequal in recent decades
reduction in top-rate income tax
large-scale privatisation leads to rise in executive pay
real value of jobseeker’s allowance fell
what are the causes of income inequality between households
impact of the state wealth inequality household composition level of skills and qualification differences in earnings
absolute poverty d
when an individual or household’s income is insufficient for them to afford basic shelter, food and clothing
relative poverty d
when people are poor in comparison to others
what are the methods a government can use to influence income and wealth distribution
taxation
monetary benefits
direct provision of goods and services
legislation and labour market policy
poverty audit d
assessment of the government’s performance in eradicating poverty
what are the two types of monetary benefit (income and wealth)
means-tested (working families tax credit WFTC)
universal (child benefit)
what is an example of legislation and labour market policy (income and wealth)
national minimum wage 1999
in the last three decades, the number of households with incomes below ____ % of the average level has grown to almost _____ million
40 %
10
what are some of the government’s targets when it comes to eradicating poverty
increase the proportion of working-age people with a qualification
improving literacy and numeracy at age 11
reducing homelessness
what are the causes of poverty
unemployment low wages sickness and disability old age poverty trap imperfect information
poverty trap d
when individuals or households are no better off following a pay increase because tax paid increases and benefits are withdrawn
what are some measures used by the government to reduce poverty
minimum wage cutting bottom rates of income tax tackling unemployment training and education increasing benefits tax credits
voluntary unemployment d
when a worker chooses not to accept a job at the going wage rate
national minimum wage d
a statutory minimum wage introduced to boost the earning of the low paid
what must the minimum wage be set above in order for it to have an impact
the market equilibrium wage rate
what do free-market economists argue about national minimum wage
firm’s costs of production rise leading to higher unemployment
how can you show national minimum wage on a graph
MRP (D) against S diagram, wage rate set above the equilibrium
