Edexcel AS/A Level Economics revision

Lorenz Curve and Gini Coefficient  The Lorenz Curve illustrates the distribution of incomes in a country. The Line of Equality represents a country where there is perfect equality - each member would receive the exact same income. The closer the Lorenz Curve is to the Line of Equality, the higher the income equality of that country. The further away from the Line of Equality, the lower the income equality.  The Gini Coefficient indicates how unequal a society is. It indicates how far the Lorenz Curve is from the Line of Equality. It is good for comparing several countries to one another as it is quantitative, but doesn't give as much information as the Lorenz curve does, as it leaves out the distribution of income. It is calculated using the above formula.  G = A/A+B It always lies between 0 to 1, where 0 is perfect equality,  where everyone gets the same amount, and 1 is perfect inequality, where one person has all...

Income vs wealth Income is the flow of money, whereas wealth is a stock concept.  Income is the money earned over a set period of time, e.g wages, rental payments, dividends and interest.  Wealth is the value of one's assets, e.g savings, shares, bonds, pension, property and the value of physical goods.  NB:  transfers like gifts, etc. are additions to wealth, not income, and increase the value of assets (capital gains)  Wealth is a lot harder to calculate in monetary terms than income, so this makes taxing income a lot easier, and is why we have an income tax. Taxing wealth could result in people moving wealth abroad to avoid the tax.  Another reason that taxing income works better is that taxing wealth makes it seem to people that they are losing something that is already theirs, whereas because income is taxed before people receive it, people are not as resentful.  Taxes paid for wealth inc...