Addressing income and wealth inequality

Need to know

What you need to know

• Intervention is based on the concept of equity (fairness), not necessarily absolute equality.
• High inequality can be a source of market failure and negative externalities like crime and social friction.
• Governments aim to reduce, not eliminate, inequality to a more socially acceptable level.
• The Lorenz curve and Gini coefficient are essential tools for measuring income distribution before and after government intervention.

Explanation

Addressing income and wealth inequality

1. Intervention is based on the concept of equity (fairness), not necessarily absolute equality.
2. High inequality can be a source of market failure and negative externalities like crime and social friction.
3. Governments aim to reduce, not eliminate, inequality to a more socially acceptable level.
4. The Lorenz curve and Gini coefficient are essential tools for measuring income distribution before and after government intervention.