| What is an Income? | -This is the Set Amount of Money one will receive over a Set Amount of Time
-It can come from Wages, Interest on Bank Accounts, Dividends and Rent from Properties |
| What is Wealth? | -This is the Value in Money of Assets Held. This Includes Property, Land, Money and Shares |
| What will affect the Distribution of Income? | -People will earn Different Wages, perhaps Certain Skills are in more Demanded than Others. So those Workers will gain a Higher Wage
-Unwaged People (Unemployed or Pensioners) will have their Income from State Benefits, which is quite Low
-Tax and State Benefits. In Britain, there is a Progressive Tax System where Higher Incomes are Taxed at a Higher Percentage of their Earnings over Certain Levels. This is given out as Benefits to the Unemployed or to those with Disabilities (which may be low)
-In the UK, those working in the Public Sector will be earning More Per Week than those working in the Private Sector
-Regions of the UK also play a part. The Highest Paid Parts in the UK was the South East and London, with the North East and Northern Ireland being in the 2 Lowest Paid Regions |
| What will affect the Distribution of Wealth, and why is it more Unevenly Distributed? | -Wealth will earn Income. For Example, Shares can Increase in Value and Make more Income. Those who get their Income from their Wealth can Invest the Income again (more shares) which generates more Income, and then they Reinvest. The Wealthy get Wealthier...
-Assets Increase in Value much more Quickly than Income
-In the UK, Income is Taxed but Wealth Isn't. Brilliant |
| What does the Lorenz Curve show? | -This is used to represent the Distribution of Income or Wealth, as a Graph
-The Horizontal Axis is the Cumulative % of the population, and the Vertical Axis is the Cumulative % of Income or Wealth
-A Diagonal Line represents Complete Equality, and as the Curve Slops, Inequality becomes more Extreme |
| What is the Gini Coefficient? Give the Formula of such.
-What is the UK's Gini Coefficient | -This measures Inequality and is Found in the Lorenz Curve
-It is calculated via Area A Divided by (Area A + Area B)
-If it is 0, there exists Complete Equality
-If it is 1, there exists Complete Inequality
-The UK rose from 0.27 in 1979 to 0.35 in 2019 |
| What is the Difference between Equality and Equity
-Link to Normal and Positive | -Equality: Everyone is treated completely equally, and get the Exact Same Things
-Equity: More into Fairness. Cause People has Different Circumstances, it focuses on what allows people to get what they Need
-Equality is a Positive Statement usually, as it deals with Facts, and Equity is a Normative Statement, because people have Different Opinions on what Equity means |
| What is Horizontal Equity and Vertical Equity | -Horizontal is where People with the Same Circumstances are treated Fairly (The Same) (Same Level of Income are Taxed the Same Amount)
-Vertical is where People with Different Circumstances are treated Fairly but Differently (Different Levels of Income are taxed Different Amounts) |
| What are the Negative Effects of an Unequal Distribution of Income and Wealth? | -Absolute and Relative Poverty Remains High
-Restricts Economic Growth and Wastes the Talents of the Poorest due to them having lack of Money to start Firms
-As Incomes Rise, Spending on Imports does too. The money thus leaves the Circular Flow
-Social Impacts too: Inequality usually leads to Poorer Health and Higher Crime. Well Being overall falls |
| What are the Positives of Unequal Distribution of Income and Wealth in a Society? | -Lower Earners may Work Harder to gain a Higher Income, boosting Productivity
-Incentivises people to start their Firms in order to increase their Wealth and Income
-Higher Incomes for the Rich may lead to them Investing more in Firms. This creates Jobs, making some of the Wealth go down to the Poorest in Society. This is the Trickle-down Effect |
| Why could you argue a Perfectly Equal Distribution of Wealth and Income is Inequitable? | -It may not be fair as some People within a Society couldn't increase their Relative Wealth via Hard Work or Entrepreneurship and therefore the Incentive to do so would be low |
| What is Relative Poverty? | This is where Someone will have a Low Income relative to Other Incomes in their Nation. For example, People with an Income that's 50% less than the Average Income may be seen as Relative Poverty
-So someone in Relative Poverty in a Rich Nation may have the same income as someone who is Wealthy in a Poor Nation |
| What is Absolute Poverty? | -This is when someone can not Afford the Basics like Food and Shelter
-The Minimum Income which is Needed for the Basics is called the Poverty Line, which is at $2.15 |
| What are the Causes for Poverty | -Unemployment. Even if Unemployment Benefits exist, Unemployed People will be at the Bottom Level of Income in that Nation
-Low Wages, which are usually given to those with Low Skills and Qualifications
-State Benefits may be Rising more Slowly than Wages. The Relative Incomes of People relying on benefits therefore Fall overtime |
| What is the Poverty Trap? | -This affects People who are in Poverty, which may be due to Reliance on State Benefits, Mean Tested Benefits and Low Wages
-Here, when people get Higher Wages, they only get a Smaller % of their Wage Increase, because they have to pay Income Tax and National Insurance and their Benefits will be Reduced. Furthermore Transportation and Childcare costs?
-This could even lead to a Drop in their Disposable Income, and their Marginal Tax Rate will be High (% that'll be taken from the next £ they earn)
-Combining Income Tax, National Insurance, and the Benefit System, can make it Financially Bad for People to find Work, or Increase the Number of Hours they work. Hence they are Trapped |
