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Module 1: Wealth and income distribution

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Equity in the Distribution of Income and Wealth

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XSIQ
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Economics - Equity in the Distribution of Income and Wealth

Equity in the Distribution of Income and Wealth

Income and wealth distribution is the manner in which the income and
wealth is divided amongst participants in the production process and other
dependent members of the economy. As an objective, the government does not
aim for absolute equality in income and wealth distribution, as this would
reduce the incentive to work harder. The government does, however, aim for
equity or fairness in income and wealth distribution in order to provide
everyone with a minimum standard of living.

In this topic you need to be able to define various types of income.

FACTOR INCOME
Income derived from using the factors of production in the production
process. It includes rent, interest, wages, salaries, dividends and profit.

MARKET INCOME
As per Factor Income.

PRIVATE INCOME
As per Factor Income and Market Income.

TRANSFER INCOME
Money transferred from one group in the economy to another. No
productive activity takes place. The main form of transfer income is social
welfare payments, such as unemployment benefits.

GROSS INCOME
The sum of Factor Income and Transfer Income.

DISPOSABLE INCOME
The income available for spending or saving after income tax has been
deducted. In Australia, the Medicare Levy is also deducted.

SOCIAL WAGE INCOME
Disposable income plus the estimated (imputed) value of non-cash
payments that help the needy, for example, spending on collective goods and
services, such as education and health.

REAL INCOME
Income that has been adjusted for the effects of inflation.

Wealth is achieved through accumulated saving. Savings can then be
mobilised to purchase productive assets like land and buildings, or used to
purchase speculative assets such as antiques and artwork. Wealth can also
be accumulated through inheritance.

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