The distribution of income and wealth

• Kuznets hypothesis: Theory that as an economy grows, inequality is initially increased, then decreased.
• Absolute poverty: When a person doesn't have enough income to fulfil basic needs.
• Fiscal drag: As wages rise, a higher proportion of income is paid in tax
• Equity: Fairness, justness. Involves value judgements.
• Inequity: Unfairness, unjustness. Involves value judgements.
• Horizontal equity: People in identical circumstances are treated equally.
• Vertical equity: People in different circumstances are treated unequally yet fairly.
• Poverty trap: Where a rise in income leads to a decrease in eligibility in benefits, forcing individuals deeper into poverty.
• Means tested benefits: Entitlement to certain benefits depends on whether the income or wealth of an individual is below a certain level.
• Distribution of income and wealth: The way in which total income and wealth are divided among the population of the economy.
• Lorenz curve: Can be used to illustrate and measure distributive inequalities.