11.2.22 Inequality session 2

by Robert Tomlinson·2 views·Updated Feb 11, 2022

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can I think so? Welcome to your second session of inequality.
Here are landing objectives today.
We're only thinking about different causes of wealth and income. Inequality
will consolidate the Larenz curve on Gini
coefficient will be practising exam questions.
One particularly
tricky exam question. You'll be pleased to know
which I found Old spec, which is kind of a bit of a brain teaser.
We'll be thinking about that at the end, just as a reminder.
This does appear on the advance information
that wasps
released by grand boards
this week.
So it will appear, and you do need to know
the ins and outs of these elements of this particle specification.
So this is one topic that you should be very, very confident in
because you will be assessed on it in some form.
We are continuing to study inequality next week,
so the week commencing the 14th of February
we will continue in inequality, then will be moving on
to 4.3 developing economies
before halftime
on DS.
Then
continue that after halftime before
preparing for your for your mark with micro vision.
Just a quick starter. I don't want you to take seven minutes here just four minutes.
Please.
Can you explain to one another how thes factors can cause inequality?
And well, so does pause the video now
and then Just take it in turns to explain one factor
to one person, the other person Explain another factor Tiu
Based on these four here, how do these lead to inequality and wealth here?
Four minutes of
it.
So income that was a different. We know that from the fact that people get paid more
than other people in certain professions.
Also, we know that from our study of the main market with high levels of income,
people can Passmore more wealth and that leads to equality quite simply,
wealth levels. So wealthy gets wells
with assets. If you have a high value of assets, you can use that to generate
income to generate more wealth on. We've seen that
incredibly, since the start of the pandemic with markets,
you know,
being very bullish s O people who have invested
in markets in stocks and shares or just in property
is the case as well.
They're the value of everything that they own increases.
So if you have wealth,
then that
wealth
increases in value and then you have more wealth, right?
Also, you can use wealth.
Tiu on.
You can use some access to generate an income
which then could be used to touch us more assets
on inheritance. So
that's kind of why we see
large inheritance taxes, really is to maybe a policy to reduce inequality
when inheritance
for
a single person
intestate anything over £325,000
in terms of the value of your state is tax that 40%
for a married couple that £650,000 of the allowances doubled.
But with inheritance,
with high levels of inheritance and high levels of historical wealth,
we steal wealth being passed on.
Of course,
that means that there is inequality
in society
on chance. I can't remember what the proportion Woz,
but we looked at it in a starter
a few
lessons ago
where we were thinking about what proportion of
individuals in the world have no access to
any kind of state benefits at all.
I think it was over 55%.
I think I think it's 55% was definitely over 50%. So for the lucky few
that didn't have access to one of us credit
that there's less inequality there in
wealth because you have that guaranteed income
from the state.
So there we go back to our learning objectives were going todo be
thinking now
about
consolidating that arounds, curve and TV coefficient. There were just some
causes of wealth. Inequality will be thinking later, after this
about causes and income inequality. So you need some graph paper
for this task.
So what you need, Tiu using graph paper,
I'd like you to draw all around scar from the data below.
Now this this can be quite tricky
because we're thinking about
cumulative population and cumulative income.
Here there are some overlapping brackets. So I've given you some hints
to try to help you
to make sure that you plot the right points.
But we've got a table here
which tells us income quintile
onder percentage share of
income that these
proportions of the population have so effectively the lowest 10% of
the poorest temps and population in this case have 1% share
of total income
on the lowest. 20% of the population have a 3% sure of the total income.
So what That means is because the lowest 10% is included within the lowest. 20%
is basically the 1st 10%. 1%
in the next 10% have 2% but in total they have
3% together. So there are some overlapping brackets here.
Then the next
set of data
says that the 2nd 20% of the population in order of the income of the and they are 11%
of total income. So what that means is the lowest 10% have 1%.
The lowest, 20% have 3%.
The 2nd 20% have 11%.
So that means to the bottom 40% the lowest 20% on the 2nd,
20% have 14% of the total income.
I hope
that
makes sense. I said percent a lot
did just say percent and awful lot didn't
but effectively.
There are
overlapping brackets here
and
I'd like you to use graph paper to try to draw Lauren's curve and,
as an extension,
shade your graph to show how the geek proficient would be calculated as well.
Remember, we have
income on the Y axis community of income on the
Y axis on cumulative population on the X axis.
Really? In this case is TMP socially committed wealth. But
we've got
the money measure on the Y axis
on population on the X axis,
maybe 15 minutes. Here.
15 minutes to use the graph paper
with this data
to draw.
Hi, Lorenzo
Ondas An extension Can you shaved your graph?
To show how the genie coefficient would be calculated.
So if you compose a video now, please
And you've got 15 minutes.
Good luck. Off you go.
So here we are.
Here is
a set of the answer's a part of the answers So we had we had that
table there
in terms of the line of Equality reported point at 10
10 2020 40 40 60 60 So on and so forth.
Just a straight line
with equal
measurements on the accent. Why accordance?
And then with the Larenz curve,
you should have had points
at 10 cents a population that won the last 10% and in 1% of income
20% of the population on three
And then we have this cumulative effect here.
So 40 cents the population which was the lowest 20% on the 2nd 20%
they together on 14% of the income
on then the 3rd, 20%
on 17% of the income. So 14 last 17 gives us our point to plot. At 31.
The fourth gives us
10%. Gives us that they 23% of the incomes like it was a point of 18. 54.
And then we have points at 95
8100 and one
so well done
if you create a Larenz Kerf, it looked like this.
We have our line of equality
and then you're Lorenzo have
bowed line. They're showing, actually,
in reality
income isn't distributed equally. Know there is
this disparity here. Between
of
disparity, there is unequal distribution of income
the areas A and B
shown there on my diagram. The Gini coefficient is calculated by taking the area pay
over the area of pay.
Trust me.
Okay,
there we are. Some practise and consolidation with friends.
Let's move on to exam questions
for the remainder of the session.
So I mentioned to you
in exam question 2017 paper.
This was it. So this was the first ever a level paper
was an a B C D. Following this.
There were some questions which will keep for a later day.
But
which is the following, please? A B, C or D
eyes correct. If there is perfect income
inequality, just discuss income. Equality. I should say sorry.
Just discusses the
next You just study seconds
happy to report.
So the correct answer is a
Remember
a value of one
means one person
has all of it.
70
is perfect equality.
You could also just think about the areas and think about OK,
what makes it one like a over A plus B.
How is that one? How is that zero?
If I'm shrinking and increasing these areas, you could think of it that way.
Mathematicians on figure it out in an exam.
So you know, in the heat of the moment.
You know, if Area A is really, really big.
If area is massive on DS, the line is like a way to, you know, boat all the way out.
An area is really big. We have a really big number on the
top on. Do we have the same number on the bottom
on DS
The genius, therefore one. So you could think of it that way
if you wanted todo
just my simple trick one means 1000
owns everything.
So they go on a BCD. More likely
is something like this.
Can you explain one likely reason for the change in UK income inequality since 2007.
Using this data is this is this is
a form.
Our question is from his question, four sets from a short answer part of the paper.
And you've got five minutes to write this
under time conditions. Pause the video. Five minutes
of you guy.
So they're going to be marked for application here.
Okay, so you've got to refer to the data.
So in terms of the change and income inequality, we've got to say, OK, since 2007,
the genie competition has gone from 0.3620 point 34.
So that's further towards zero, right?
Say effectively, we're seeing a more equal society.
So we've got to choose one reason
why
society would become more equal in terms of its income
on bond.
That could be for for many reasons. We looked at some yesterday.
Here are some more, but for this example, here's more for this example to know
that there's one mark for explain for
identifying a reason one mark for explaining it
and then two marks
for
most of the data.
You could choose to start with the definition. I wouldn't say that's a bad approach
financially for four marks.
Ensure answer section really want you to get into identifying explaining a factor.
So in terms of those causes, income inequality here some more,
some more causes
of income inequality, thes air,
some that are from your on button textbook
to the course specific textbook for medics.
Self.
These are
the factors that we mentioned there.
We like to sound yesterday, of course, in that where document with that task.
But other causes incoming quality include on income,
like some workers just work more than
more than others,
effectively
another cause of income inequality is that not a lot people are able to work.
So, you know, for that previous question,
maybe
there wa something which made it easier for people to work. So
those non workers were able to enter an income and therefore income inequality,
decreased
wealth,
so increase in wealth for some people means that assets
could be these assets could be generated used to generate income
returns on their investment and rent,
and that leads to
then received more income and therefore greater income inequality.
Government policy and tax systems will stand a lot of time on
because we look at regressive tax systems.
But effectively
governments can redistribute income. And, in fact, one of the CORP purposes of
government is to
to use tax revenue
to ensure that
certain sectors of society on low incomes
are supported on loan comes on bond
in positions where they are unable. Tiu
subsist. Now, unable Tiu
generate income to be able to live. They are supported. That's a like a core
component core element
of government policy,
the degree of competition in product markets. How does that cause income?
Inequality?
Well,
way have studied
markets. We've got highly competitive markets.
And then we have, like, these more dominant markets. Right,
Please.
On
depending on how much competition there is
in these product markets, like there's lots of competition,
then
we are.
We have firms which are, you know,
they're fighting over profit and they're being competitive
if we don't have a lot of competition.
We have these, like oligopolies. Not please
on, but they're able tiu
so they have more power to increase price right?
They have more power to extract consumer surplus
on DTE Tiu
to gain super normal profit.
So if we have a society with these incredibly dominant first,
then we have
potentially more income inequality.
Because these firms are able to extract more, continue surplus,
increase that super normal profit on DS, then the owners of these firms,
you know that
taking an unequal
share of overall by incoming society.
So again, when I come back on Monday,
we'll be thinking about the diagram for that one in particular,
because that is a very nice
factor to talk about,
because we've got lots of diagrams that we can use to explain it.
So in a longer response,
that would be the go to, I think.