Equity

• Equity refers to a fair or a just distribution of economic welfare, which as a concept requires a value judgement.
• Equity is a normative concept and cannot be measured using some objective indicator.
• The Lorenz curve shows the actual money income distribution, where the difference between perfect money income equality and the curve is the inequality gap.
• The graph of actual money income distribution:

  A) Income

  B) Households

  C) Perfect Equality

  D) Lorenz Curve

  
• Gini Coefficient of Inequality = A / ( A + B )

  
• The greater the income inequality associated with a nation, the higher the number of its Gini coefficient.
• Causes of Income Inequality:

  • Inequality of wealth
  • Differences in ability
  • Differences in hours worked
• Causes of Growing Income Inequality:

  • Technological advancement
  • Globalisation
• Problems caused by Income Inequality:

  • Low rates of economic growth
  • Social injustice
• Benefits of Income Inequality:

  • More productive workforce
  • Technological advancements