Too Little or Too Much? : A Level Economics

Preparing for an A Level can always be quite overwhelming, and A Level Economics is no exception. This article covers one of the topics you will study; the inequalities in the distribution of wealth and income in the labour market, and breaks it down into more manageable study information.

Inequalities in the Distribution of Wealth and Income

The distribution of wealth and income are major factors which reflect the equity and inequities that exist in the labour market. While wealth refers to the accumulation of a stock of tangible and intangible assets, income is the earnings which are received over duration of time.
The distribution of income can be considered through how it is shared among:

• Factors of production (functional income distribution)
• Households (size distribution)
• Regional distribution (Geographic distribution)


Functional income distribution occurs through the income that is earned by individuals. This could be through interest from capital as a factor of production, wages from labour as another factor of production, rent obtained through land as factor of production or profits earned through entrepreneurship which is the fourth production factor.


The size income distribution has affected the households in different ways and has created wider gaps between households. The following factors have attributed to widening such gaps:

• Variations in qualifications and skills
• Discrimination
• Different compositions of households
• Inequitable wealth among households
• Amount of hours invested in labour which increases earnings
• Availability of educational opportunities

Geographical income distribution occurs due to the differences that exist in regions. It is affected by factors which include:

• Industrial structure
• Amount of recipients of welfare claims and benefits in the region
• Structure of the occupation
• Skills and qualifications of the labour force

The free market system enables the determination of income through the forces of demand and supply. This results in the payment of wages which is the reward for labour.

The problems of inequality in incomes arise when individual with abilities that are very high in demand receive incomes which are commensurate with such demands. Such incomes motivate the individual whose ability is highly sought after. In comparison to an average worker, this could be termed unfair income because of the incredible sums which are paid out to few individuals that command extremely high earnings.

Wealth is obtained through different sources. Primarily it is gained through inheritance. This therefore affords those with greater levels of wealth in one family, higher benefits and access to opportunities to enhance themselves and acquire more wealth than individuals who are not as highly privileged to have inherited wealth from their family. This leads to inequity in the earnings of individuals and even a widening gap due to the wider scope of opportunities that are available to the more affluent individual who acquired the wealth from an inheritance.

From both income and wealth, it can be clearly seen that the way in which it is divided affects the operations in a free market. Hence, when the gaps are widening it affects the performance of the market and with an affinity towards catering the desires of those who can afford it, the poorer classes are left-out thereby limited their opportunities and choices. Under such conditions, the operations of the market would result in failure.



This article has been put together by the distance learning organisation Start Learning who are experts in home study.

If you want to find out more about A Level Economics or many other distance learning courses please browse their website: Start Learning

Kerrana McAvoy
Academic Director – Start Learning
Start Learning