4.2.2 Inequality

• What is income inequality?

  Refers to the unequal distribution of earnings between individuals
• What is wealth inequality?

  Refers to the difference in the value of stock assets owned by individual
• What is the Lorenz curve?

  Visual representation of the measurement of income inequality
• What are characteristics of the Lorenz curve?

  • Plots the cumulative percentage of the population against the cumulative percentage of total income
  • The 45° line represents perfect equality 
  • The curved line represents the income distribution for a particular country 
• What is the gini coefficient?

  A numerical calculation of inequality based on the Lorenz curve 
• What are these values of the gini coefficient?

  • 0 = perfect equality
  • 1 = perfect inequality
• What is the equation for the gini coefficient?

  G = A (A + B)
• What does A and B represent for the gini coefficient?

  A = total area between perfect equality and lorenz curve

  B = total area below the line of perfect equality 
• What is the Kuznets curve?

  • Shows that when the economy is at an early stage of development and primarily agricultural, incomes are relatively evenly distributes
  • Industrialisation results in increased inequality but at some point it starts to decrease
• What is a capitalistic economic system?

   Free market economy where resources are owned by the private sector and prices are determined by supply and demand
• The split between what characterises the significant of capitalism of inequality?

  • The owners of the resources required for producing and distributing goods 
  • The working class who sell their labour to the owners of resource in exchange for labour