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20 Cards in this Set
- Front
- Back
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Income |
Personal or household income is the flow of money a person or household receives over a period of time. |
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Wealth |
Personal wealth is the stock of everything which has value that a person or household owns at a particular point in time. |
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Distribution of income |
How income is divided between the rich and the poor, or different groups of society e.g. race, age or gender. |
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Distribution of wealth |
How wealth is divided between the rich and the poor, or different groups in society e.g. regional, age or gender. |
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Factors influencing the distribution of income |
-Factors of production, the distribution land, labour, capital and enterprise. e.g. landlords earn money from owning land which they rent out. -The distinction between earned and unearned income, earned=wages and salaries, unearned=investments and interest. -Wage and salary differentials, high demand for scarce workers results in higher pay e.g. pilots |
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Factors influencing the distribution of wealth
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-The ability to benefit from capital gains, if an individual owns an asset and it appreciates their wealth is increasing e.g. House, Shares, etc. -Private pension assets, if they contribute to a private pension this acts as another store of wealth. -Inheritance, gifts and luck, receiving a large amount of money as a gift or through inheritance influences the wealth of an individual. -Wealth/Income taxation, wealth is much more lightly taxed than the tax on income. The wealth also can avoid tax using methods unavailable to less wealthy people. |
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The difference between Equality and Equity |
Equity means that everybody is treated fairly. Equality means that everyone is treated exactly the same. |
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Lorenz Curve |
A graph on which the cumulative percentage of total national income or wealth is plotted against the cumulative percent of the population (ranked in increasing size of share). The extent which the curve dips below the straight diagonal line indicates the degree of inequality of distribution. |
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Gini coefficient |
Measures the extent to which the distribution of income or wealth among individuals or households within an economy deviates from a perfectly equal distribution. |
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Poverty |
The state of being very poor and not having enough money or income to meet basic needs |
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Absolute Poverty |
A condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation, facilities, health, shelter, education and information. It depends not on income but access to their services. |
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Relative Poverty |
Occurs when income is below a specified proportion of average income, e.g. below 60% of median income. |
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Causes of Poverty |
-Old age -Unemployment -Low income |
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Effects of Poverty
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-Educational deprivation -Health deprivation -Communal effects |
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Fiscal drag |
E.g. inflation occurs making everyone earn more nominally, but at the same value, therefore someone who previously wasn't paying tax now is and now have less real income than before inflation |
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Means-tested benefit |
The ability to claim these benefits depends on a person's income or 'means'. |
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Universal benefits |
Benefits claimable of right and not dependent on a person's income. |
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Poverty trap |
Fiscal drag can result in loss of means-tested benefits, and can also lower the universal benefits which are kept. |
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Unemployment trap |
People decide they are better off out of work and living on benefits compared to a low paying entry level job.
Doesn't take into account undeclared earnings. |
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Consequences of government policies that affect distribution of income and wealth |
-Policies can redistribute income and wealth equally and reduce poverty, although some argue they reduce incentives to work hard. -Policies can alleviate child, old age and fuel poverty, but these have been only partially achieved. -Arguably, faster economic growth reduces absolute poverty. -Some fiscal measures try to reduce poverty but result in poverty and unemployment traps |
