Inequality — Edexcel A-Level Economics A
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Inequality explained
Income is a flow earned over a period, such as wages, rent, interest, profit and transfers.
Read the full explanation
Wealth is a stock of accumulated assets, such as property, shares, pensions and savings, measured at a point in time. Income inequality describes how unevenly flows are distributed; wealth inequality describes how unevenly stocks are held. Wealth is usually far more unequally distributed than income because assets accumulate, generate further returns and can be inherited. A high-income earner may hold little wealth; a low-income household may own valuable housing. Policy differs: income taxes and benefits target flows, while capital gains tax, inheritance tax and wealth taxes target stocks. Distinguish flow from stock before choosing an answer.
Your focus
- Define income as a flow and wealth as a stock.
- Explain why wealth inequality typically exceeds income inequality.
- Link income and wealth policies to the flows or stocks they target.
Inequality exam tips
Marking Points
- Income is a flow measured over a period; wealth is a stock measured at a point in time.
- Income includes wages, rent, interest, profit and transfers; wealth includes property, shares, pensions and savings.
- Wealth inequality is typically greater than income inequality because assets accumulate and are inherited.
- High income does not guarantee high wealth, and low income does not preclude wealth.
- Policy instruments differ: income taxes and benefits affect flows; capital and inheritance taxes affect stocks.
Examiner Tips
- 💡State the flow-versus-stock distinction explicitly in your reasoning.
- 💡Use an example: a high-earning renter versus a low-income homeowner.
- 💡Match each policy instrument to the flow or stock it targets.
Common Mistakes
- Calling wealth a flow: wealth is a stock held at a point in time, while income is a flow over a period.
- Assuming high earners are always wealthy: income and wealth can diverge sharply.
- Confusing the policy tools: benefits and income tax target flows, not accumulated assets.