UNEQUAL DISTRIBUTION OF INCOME AND WEALTH
Free market economies allocate resources to those with spending power. The more income an individual has, the greater will be their spending power, and ability to influence resource allocation.
Income: flow of funds going to a factor owner, eg a
doctors salary, the hourly rate for a bar worker
Wealth: the value of assets at a moment in time, eg financial assets
(savings); physical assets (houses)
The distribution of income and wealth is unevenly shared out, meaning that individuals have uneven claims to the economy's resources. Some have access to a large number of resources, others access to so few that they are conceived to be living in a position of poverty. The debate about the gap between the rich and poor is considered to be normative in nature. Some argue that it is inequitable, whilst others suggest it assists the normal workings of the market mechanism, providing incentives to income earners to maximise their own returns.
Government intervention occurs in a variety of the distribution of income.