Equity in the distribution of income

Introduction	Unequal distribution of income Inequality Many believe this is unfair as they live in a much lower living standard Reasons: born in to poor family Poor or no education Poor helathcare or malnutrition May hav had to work before they could finish their education Consequences: low living standards Lack of healthcare access Low level of education Cyclical High incomes act as an incentive to work hard Equity, things are more fair not equality where everyone makes the same as thaty would remove incentive to work
Lorenz curve and gini index	Lorenz curve: takes income data ajnd presents them graphicaly GNI- shows equity
Taxation	Government impose tanks in order to get money for gov. things
Direct	Taxes imposed on peoples incomes or wealth and firms profits
Indirect taxes	Taxes placed on goods and services
Progressive taxes	As income rises so do taxes Tax brackets Calc:
Regressive taxes	The proportion of income paid in tax falls as income rises
Proportional taxes	Constant for all income levels Simple
Transfer payments	Govs can use to redistribute income and provied assitence to groups who need it. Benefits
Gov expenditure to provide essentials	Provide or subsidize necesities. Positive externalities Healthcrare schools etc.
Evaluations	Many agree that govs should ensure a reasonable level of living Some say it interferes with the market force and results in innefeciencies Becuase 1, if firms have to pay social security costs to workes thus hiring fewer workers 2. disencourage entrepeurnal activity 3. negative effect on growth Many argue that the gov should not distribute income