4.2.2 Inequality
a) Distinction between wealth and income inequality
Wealth: Wealth is a stock of asset at a particular point in time e.g. housing, pensions
Income: Income is a flow of money with respect to time e.g. interest, wages
Equity: fairness – everyone got diff 需求 so its abt getting wt ppl want
Equality: everyone treated equally – got exactly the same thing
a) Measurements of income inequality:
the Lorenz curve (diagrammatic analysis)
the Gini coefficient
= A / (A+B)
‘0’ = super equality
‘1’ = super unequal
c) Causes of income and wealth inequality within countries and between countries
Reasons for income inequality:
1. Difference of wealth
2. Human capital (education and skills)
- Income/wages are determine by labor market MRP
- Workers skilled/productive => higher wages (depends on health & education)
- Wages for lawyers OR cleaners
V tech X tech less productive
Increase productivity
3. Discrimination
4. Government tax & benefit policies
- X progressive tax system
- Increase regressive tax
- No proper tax system
- American not give out benefit becoz they think inequality is good
a) Distinction between wealth and income inequality
Wealth: Wealth is a stock of asset at a particular point in time e.g. housing, pensions
Income: Income is a flow of money with respect to time e.g. interest, wages
Equity: fairness – everyone got diff 需求 so its abt getting wt ppl want
Equality: everyone treated equally – got exactly the same thing
a) Measurements of income inequality:
the Lorenz curve (diagrammatic analysis)
the Gini coefficient
= A / (A+B)
‘0’ = super equality
‘1’ = super unequal
c) Causes of income and wealth inequality within countries and between countries
Reasons for income inequality:
1. Difference of wealth
2. Human capital (education and skills)
- Income/wages are determine by labor market MRP
- Workers skilled/productive => higher wages (depends on health & education)
- Wages for lawyers OR cleaners
V tech X tech less productive
Increase productivity
3. Discrimination
4. Government tax & benefit policies
- X progressive tax system
- Increase regressive tax
- No proper tax system
- American not give out benefit becoz they think inequality is good
