2.4.5

Inequality

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Income vs Wealth

Income is the flow of money received, and wealth is the sum of the value of all assets.

What is income?

What is income?

Income is a flow of money, often measured on a monthly or annual basis.

What is wealth?

What is wealth?

Wealth is the sum of all assets, including pensions, money in the bank, financial investments, and the value of a home.

Factors influencing distribution of income/wealth

Factors influencing distribution of income/wealth

Taxation policy: regressive policies will tend to increase the income and wealth gap between different groups in a country. Progressive taxation policies will reduce the gap.
The differences in wage between low and high skilled labour.
The level of discrimination against different groups of workers.
Regional differences in earnings.
Unsalaried individuals depending on state benefits.

Inequality of Wealth and Income

In a market economy, the spread of wealth is usually more unevenly distributed than the spread of incomes.

Income inequality

Income inequality

Incomes are the payments for factors of production. For most people, their wages are their primary incomes.
In a market economy, different people get different wages based on the jobs they have. Each person then spends money on the basic costs of survival (needs, the cost of which are the same for each person) and then spends a proportion of what is left on wants.

Wealth inequality

Wealth inequality

The money that a person does not spend is saved and accrues as wealth.
Over time the person on the higher income gains wealth quickly compared to the middle income, with the low-income person acquiring very little wealth at all.
In the UK, wealth is distributed more unequally than income. This is because differences in income can compound over years and over generations if wealth is passed on through families.

1

Microeconomics

1.1

Competitive Markets: Demand & Suply

1.1.1Markets & Demand 1.1.2Diminishing Marginal Returns 1.1.3Supply 1.1.4Market Equilibrium 1.1.5Price Mechanism 1.1.6Consumer & Producer Surplus 1.1.7IB Multiple Choice - Demand 1.1.8IB Multiple Choice - Supply

1.2

Elasticity

1.2.1Elasticities of Demand 1.2.2Factors Affecting Price Elasticity of Demand 1.2.3Elasticity of Supply 1.2.4Price Elasticity of Supply 1.2.5IB Multiple Choice - Price Elasticity of Demand 1.2.6IB Multiple Choice - Price Elasticity of Supply 1.2.7IB Multiple Choice - Other Elasticities

1.3

Government Intervention

1.3.1Indirect Taxes & Subsidies 1.3.2Application Question - Taxing Prices or Quantities 1.3.3Subsidies & Price Controls 1.3.4Deadweight Loss & Government Intervention 1.3.5Elasticity & Tax Incidence 1.3.6IB Multiple Choice - Government Intervention

1.4

Market Failure

1.4.1Types of Market Failure 1.4.2Introduction to Externalities 1.4.3Negative Externalities 1.4.4Policy for Negative Externalities 1.4.5Positive Externalities 1.4.6The Deadweight Welfare Loss of Externalities 1.4.7Case Study - The Externalities of Education 1.4.8Public Goods & the Free-Rider Problem 1.4.9Asymmetric Information 1.4.10End of Topic Test - Market Failure 1.4.11Application Questions - Market Failure

1.5

HL: Theory of the Firm & Market Structures

1.5.1Theory of the Firm & Market Structures

2

Macroeconomics

2.1

The Level of Overall Economic Activity

2.1.1The Circular Flow of Income 2.1.2Defining GDP 2.1.3Limitations of GDP 2.1.4IB Multiple Choice - Economic Indicators 2.1.5Business Cycles 2.1.6Output Gaps

2.2

Aggregate Demand & Aggregate Supply

2.2.1The Aggregate Demand Curve 2.2.2Components of Aggregate Demand 2.2.3Shape of the Aggregate Demand Curve 2.2.4Shifts in Aggregate Demand 2.2.5IB Multiple Choice - Aggregate Demand 2.2.6Short & Long-Run Aggregate Supply 2.2.7Alternative Models of LRAS 2.2.8Equilibrium in the AD-AS Model 2.2.9Output Gaps & the AD-AS Model

2.3

Macroeconomic Objectives

2.3.1Introduction to Unemployment 2.3.2Limitations of Unemployment 2.3.3Types of Unemployment 2.3.4Causes & Impact of Unemployment 2.3.5Defining Inflation 2.3.6Measuring Inflation 2.3.7Use of Index Numbers 2.3.8The Consumer Price Index 2.3.9Consequences of Inflation 2.3.10Causes of Inflation 2.3.11Inflation & Unemployment Tradeoff 2.3.12The Short-Run Phillips Curve 2.3.13The Long-Run Phillips Curve

2.4

Economic Growth, Poverty & Inequality

2.4.1Measuring Economic Growth 2.4.2Determinants of Productivity 2.4.3Economic Growth & Productivity 2.4.4Absolute & Relative Poverty 2.4.5Inequality 2.4.6Inequality 2 2.4.7Lorenz Curve 2.4.8Government Policy on Poverty 2.4.9End of Topic Test - Poverty & Inequality 2.4.10Application - Inequality & Poverty

2.5

Fiscal Policy

2.5.1Introduction to Fiscal Policy 2.5.2Fiscal Policy and AD-AS Model 2.5.3Fiscal Policy Lags 2.5.4Automatic Stabilizers 2.5.5IB Multiple Choice - Fiscal Policy

2.6

Monetary Policy

2.6.1Objectives of Monetary Policy 2.6.2Monetary Policy Implementation 2.6.3Monetary Policy & AD-AS Model 2.6.4Monetary Policy Lags & Pitfalls

2.7

Supply-Side Policies

2.7.1Supply-Side Policies 2.7.2Supply-Side Policies 2

3

The Global Economy

3.1

International Trade

3.1.1Globalisation 3.1.2Globalisation for LEDCs 3.1.3Globalisation for MEDCs 3.1.4Comparative Advantage & Trade 3.1.5Protectionism 3.1.6Arguments for Protectionism 3.1.7Arguments Against Protectionism 3.1.8End of Topic Test - Globalisation & Trade 3.1.9Case Study - Globalisation & Trade

3.2

Exchange Rates

3.2.1Floating Exchange Rates 3.2.2Fixed Exchange Rate 3.2.3Effect of a Stronger & Weaker Dollar

3.3

The Balance of Payments

3.3.1Balance of Payments 3.3.2Balance of Payments 2 3.3.3FDI & Reducing a BoP Deficit

3.4

Economic Integration

3.4.1Customs Unions & WTO 3.4.2Merged Currency

3.5

Terms of Trade

3.5.1Absolute & Comparative Advantage 3.5.2Gains from Trade 3.5.3Terms of Trade 3.5.4IB Multiple Choice - Comparative Advantage & Trade

3.6

Economic Development

3.6.1Factors Influencing Growth & Development 3.6.2International Institutions 3.6.3Measures of Development 3.6.4Barriers to Development 3.6.5Case Study - The Bottom Billion 3.6.6End of Topic Test - Emerging & Developing

3.7

The Role of Domestic & International Factors

3.7.1Interventionist Strategies 3.7.2Development Strategies 3.7.3Development Promotion Policies 3.7.4End of Topic Test - Growth & Global Development 3.7.5Application Questions -Growth & Global Development

3.8

The Role of International Trade

3.8.1International Institutions 3.8.2End of Topic Test - Globalisation & Trade

3.9

The Role of Foreign Aid

3.9.1Aid 3.9.2Limitations of Aid 3.9.3Support for Aid 3.9.4Application Questions - Developing Countries

Jump to other topics

1

Microeconomics

1.1

Competitive Markets: Demand & Suply

1.1.1Markets & Demand 1.1.2Diminishing Marginal Returns 1.1.3Supply 1.1.4Market Equilibrium 1.1.5Price Mechanism 1.1.6Consumer & Producer Surplus 1.1.7IB Multiple Choice - Demand 1.1.8IB Multiple Choice - Supply

1.2

Elasticity

1.2.1Elasticities of Demand 1.2.2Factors Affecting Price Elasticity of Demand 1.2.3Elasticity of Supply 1.2.4Price Elasticity of Supply 1.2.5IB Multiple Choice - Price Elasticity of Demand 1.2.6IB Multiple Choice - Price Elasticity of Supply 1.2.7IB Multiple Choice - Other Elasticities

1.3

Government Intervention

1.3.1Indirect Taxes & Subsidies 1.3.2Application Question - Taxing Prices or Quantities 1.3.3Subsidies & Price Controls 1.3.4Deadweight Loss & Government Intervention 1.3.5Elasticity & Tax Incidence 1.3.6IB Multiple Choice - Government Intervention

1.4

Market Failure

1.4.1Types of Market Failure 1.4.2Introduction to Externalities 1.4.3Negative Externalities 1.4.4Policy for Negative Externalities 1.4.5Positive Externalities 1.4.6The Deadweight Welfare Loss of Externalities 1.4.7Case Study - The Externalities of Education 1.4.8Public Goods & the Free-Rider Problem 1.4.9Asymmetric Information 1.4.10End of Topic Test - Market Failure 1.4.11Application Questions - Market Failure

1.5

HL: Theory of the Firm & Market Structures

1.5.1Theory of the Firm & Market Structures

2

Macroeconomics

2.1

The Level of Overall Economic Activity

2.1.1The Circular Flow of Income 2.1.2Defining GDP 2.1.3Limitations of GDP 2.1.4IB Multiple Choice - Economic Indicators 2.1.5Business Cycles 2.1.6Output Gaps

2.2

Aggregate Demand & Aggregate Supply

2.2.1The Aggregate Demand Curve 2.2.2Components of Aggregate Demand 2.2.3Shape of the Aggregate Demand Curve 2.2.4Shifts in Aggregate Demand 2.2.5IB Multiple Choice - Aggregate Demand 2.2.6Short & Long-Run Aggregate Supply 2.2.7Alternative Models of LRAS 2.2.8Equilibrium in the AD-AS Model 2.2.9Output Gaps & the AD-AS Model

2.3

Macroeconomic Objectives

2.3.1Introduction to Unemployment 2.3.2Limitations of Unemployment 2.3.3Types of Unemployment 2.3.4Causes & Impact of Unemployment 2.3.5Defining Inflation 2.3.6Measuring Inflation 2.3.7Use of Index Numbers 2.3.8The Consumer Price Index 2.3.9Consequences of Inflation 2.3.10Causes of Inflation 2.3.11Inflation & Unemployment Tradeoff 2.3.12The Short-Run Phillips Curve 2.3.13The Long-Run Phillips Curve

2.4

Economic Growth, Poverty & Inequality

2.4.1Measuring Economic Growth 2.4.2Determinants of Productivity 2.4.3Economic Growth & Productivity 2.4.4Absolute & Relative Poverty 2.4.5Inequality 2.4.6Inequality 2 2.4.7Lorenz Curve 2.4.8Government Policy on Poverty 2.4.9End of Topic Test - Poverty & Inequality 2.4.10Application - Inequality & Poverty

2.5

Fiscal Policy

2.5.1Introduction to Fiscal Policy 2.5.2Fiscal Policy and AD-AS Model 2.5.3Fiscal Policy Lags 2.5.4Automatic Stabilizers 2.5.5IB Multiple Choice - Fiscal Policy

2.6

Monetary Policy

2.6.1Objectives of Monetary Policy 2.6.2Monetary Policy Implementation 2.6.3Monetary Policy & AD-AS Model 2.6.4Monetary Policy Lags & Pitfalls

2.7

Supply-Side Policies

2.7.1Supply-Side Policies 2.7.2Supply-Side Policies 2

3

The Global Economy

3.1

International Trade

3.1.1Globalisation 3.1.2Globalisation for LEDCs 3.1.3Globalisation for MEDCs 3.1.4Comparative Advantage & Trade 3.1.5Protectionism 3.1.6Arguments for Protectionism 3.1.7Arguments Against Protectionism 3.1.8End of Topic Test - Globalisation & Trade 3.1.9Case Study - Globalisation & Trade

3.2

Exchange Rates

3.2.1Floating Exchange Rates 3.2.2Fixed Exchange Rate 3.2.3Effect of a Stronger & Weaker Dollar

3.3

The Balance of Payments

3.3.1Balance of Payments 3.3.2Balance of Payments 2 3.3.3FDI & Reducing a BoP Deficit

3.4

Economic Integration

3.4.1Customs Unions & WTO 3.4.2Merged Currency

3.5

Terms of Trade

3.5.1Absolute & Comparative Advantage 3.5.2Gains from Trade 3.5.3Terms of Trade 3.5.4IB Multiple Choice - Comparative Advantage & Trade

3.6

Economic Development

3.6.1Factors Influencing Growth & Development 3.6.2International Institutions 3.6.3Measures of Development 3.6.4Barriers to Development 3.6.5Case Study - The Bottom Billion 3.6.6End of Topic Test - Emerging & Developing

3.7

The Role of Domestic & International Factors

3.7.1Interventionist Strategies 3.7.2Development Strategies 3.7.3Development Promotion Policies 3.7.4End of Topic Test - Growth & Global Development 3.7.5Application Questions -Growth & Global Development

3.8

The Role of International Trade

3.8.1International Institutions 3.8.2End of Topic Test - Globalisation & Trade

3.9

The Role of Foreign Aid

3.9.1Aid 3.9.2Limitations of Aid 3.9.3Support for Aid 3.9.4Application Questions - Developing Countries

Practice questions on Inequality

Can you answer these? Test yourself with free interactive practice on Seneca — used by over 10 million students.

1
Factors influencing distribution of income and wealth:Fill in the list
2
Enrique Iglesias is estimated to have $100M in stocks, bonds, cash and other real estate assets. How are all of these assets best described?Multiple choice
3
Which of these is most likely to reduce the level of inequality of wealth in the UK?Multiple choice
4
Which of these is most likely to increase the level of inequality of wealth in the UK?Multiple choice

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Absolute & Relative Poverty

Inequality 2