How does inheritance contribute to wealth inequality?
Inheritance allows wealth to be passed down through generations, concentrating assets among certain families and exacerbating existing inequalities.
How does discrimination affect income inequality?
Discrimination limits opportunities for certain groups, leading to lower wages and reduced access to education and jobs, thus increasing income inequality.
How does limited access to financial markets affect wealth inequality?
It prevents lower-income individuals from growing their wealth through investments, savings, and loans, widening the gap between the rich and the poor.
How does a progressive tax system affect income distribution?
By taxing higher incomes at a higher rate and redistributing that revenue, progressive taxes can reduce income inequality and provide resources for social programs.
How does a sales tax act as a regressive tax?
Sales tax takes a larger percentage of income from lower-income groups because they spend a larger portion of their income on taxable goods.
How can government transfer payments reduce income inequality?
Transfer payments like welfare provide income support to low-income individuals and families, increasing their disposable income and reducing the income gap.
Explain how differences in human capital contribute to income inequality.
Individuals with higher levels of education, skills, and experience (human capital) tend to be more productive and earn higher wages, leading to income disparities.
How does bargaining power affect income inequality?
Workers with strong bargaining power (e.g., through unions) can negotiate for higher wages and better benefits, while those with less power may face lower pay and poorer working conditions, contributing to income inequality.
How can unequal access to education contribute to income inequality?
Limited access to quality education restricts opportunities for skill development and upward mobility, perpetuating income disparities between those with and without educational advantages.
How does social capital affect income inequality?
Those with strong social networks have better access to jobs and opportunities, increasing their income potential, while those lacking such networks may face barriers to advancement, exacerbating income inequality.
What is Income Inequality?
How annual earnings are distributed among a population.
What is Wealth Inequality?
How assets are distributed among a population.
What is the Lorenz Curve?
A visual representation of income inequality, plotting cumulative income percentage against cumulative population percentage.
What is the Gini Coefficient?
A numerical measure of income inequality, ranging from 0 (perfect equality) to 1 (perfect inequality).
What is a Progressive Tax?
A tax that takes a larger percentage of income from high-income groups.
What is a Regressive Tax?
A tax that takes a larger percentage of income from low-income groups.
What is a Proportional Tax?
A tax that takes the same percentage of income from all income groups.
Define Transfer Payments.
Government payments to individuals or businesses designed to meet a specific objective rather than pay for goods or resources.
What is 'perfect equality' in the context of the Lorenz curve?
A state where everyone has the same income, represented by a straight diagonal line on the Lorenz curve.
What does a Gini Coefficient of 0 indicate?
Perfect income equality.
What are the key differences between income and wealth inequality?
Income inequality refers to the distribution of earnings, while wealth inequality refers to the distribution of assets.
Differentiate between progressive and regressive taxes.
Progressive taxes take a larger percentage from high-income earners, while regressive taxes take a larger percentage from low-income earners.
What is the difference between a proportional tax and a flat tax?
They are the same; both take the same percentage of income from all income groups.
How do progressive taxes differ from proportional taxes in their impact on income distribution?
Progressive taxes reduce income inequality by redistributing income, while proportional taxes maintain the existing income distribution.
Compare and contrast the Lorenz curve and the Gini coefficient.
The Lorenz curve is a graphical representation of income distribution, while the Gini coefficient is a numerical measure derived from the Lorenz curve that quantifies income inequality.
What are the key differences between equality of opportunity and equality of outcome?
Equality of opportunity ensures everyone has the same chances, while equality of outcome aims for everyone to have the same results, regardless of their starting point.
Differentiate between a flat tax and a regressive tax in terms of their impact on different income groups.
A flat tax takes the same percentage from all, while a regressive tax disproportionately burdens lower-income groups, even if the rate is the same for everyone.
What are the key differences between earned income and unearned income in the context of income inequality?
Earned income is derived from labor, while unearned income comes from investments and assets, often contributing to wealth concentration and inequality.
Compare and contrast the effects of a progressive tax system and a comprehensive social safety net on income inequality.
Progressive taxes redistribute income, while a social safety net provides direct support to low-income individuals, both reducing income inequality through different mechanisms.
Differentiate between the concepts of income mobility and income inequality.
Income mobility refers to the ability of individuals to move up or down the income ladder, while income inequality describes the static distribution of income at a given point in time.
