Economic inequality
The degree of differences between an economy's individuals in their ability to satisfy their needs and wants due to monetary constraints.
There are many sources of economic inequality, but economists primarly focus on two key areas:
- Income inequality: differences in earnings and wages among individuals of a society.
- Wealth inequality: unequal distribution of assets, such as property, investments, and savings.
Income inequality
Income of households
The monetary funds households earn in return for their factors of production: rent from land, wages for labour, interest from investments, and profits from entrepreneurship.
- Income is the return households get from providing firms with their factors of production:
- Rent from land.
- Wages from labour.
- Interest from investments.
- Profits from entrepreneurship.
- Hence, income inequality results from variations in the distribution of income among individuals within a population.
Don’t confuse income inequality with poverty. While related, they are distinct concepts:
- Poverty refers to a lack of resources to meet basic needs.
- Inequality focuses on the distribution of resources.
Wealth Inequality
Wealth
The total value of someone's owned assets (savings, stocks, bonds, land, properties...) minus their debts.
Wealth Inequality
Refers to the unequal levels of wealth that individuals own.
- Wealth is the total value of someone's assets minus debts. It includes things such as:
- Real state properties.
- Stocks and bonds.
- Crypto.
- Hence, wealth inequality results from variations in the distribution of wealth among individuals within a population.
Note that almost always, both wealth and income are inequality distributed between individuals in all countries, hence there is always income and wealth inequality.
