Income Distribution and the Lorenz Curve

The distribution of income and wealth is one of the most important and contested issues in economics. How equally or unequally a society distributes its economic resources affects everything from health outcomes and educational attainment to social cohesion and political stability. This lesson examines how economists measure inequality and what the UK data reveals.

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Income vs. Wealth

It is essential to distinguish between income and wealth — a distinction that students frequently confuse:

Key Definition: Income is a flow of money received over a period of time (wages, salaries, interest, dividends, rent, pensions, and benefits).

Key Definition: Wealth is a stock of assets owned at a point in time (property, savings, shares, pensions, physical assets such as cars and jewellery, minus any debts).