Distribution of Income and Wealth

• Income is a flow of earnings over time, while wealth is the ownership of assets.
• Disposable income is what remains after deductions, while gross income is before deductions.
• Differences in wage rates and skills contribute to income inequality.
• Income inequality is influenced by household composition and government policies.
• Wealth inequality is usually greater than income inequality due to inheritance traditions.
• Inheritance tax and propensity to save affect wealth distribution.
• Lorenz curves and Gini coefficients measure income and wealth distribution.
• The Lorenz curve shows the cumulative percentage of income against households.
• The Gini coefficient measures the level of inequality in a society, with a value of zero indicating perfect equality and a value of one indicating perfect inequality.

This module discusses the distribution of income and wealth, highlighting the factors that contribute to inequality in both areas. It explains the difference between income and wealth, with income being a flow of earnings over time and wealth representing the ownership of assets. The concepts of equality and equity are also distinguished, with equality being measurable and equity being subjective. Various factors influencing income and wealth distribution are explored, including wage differentials, household composition, and government policies. The video introduces the use of Lorenz curves and Gini coefficients to measure income and wealth distribution. The Lorenz curve graphically represents the cumulative percentage of income against the cumulative percentage of households, while the Gini coefficient provides a numerical measure of inequality.