Equity and Efficiency Flashcards

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What does equity mean in economics?

Fairness in how income, wealth, and chances are shared in society.

Using scarce resources to get the most goods and services with the least waste.

Equality means everyone gets the same. Equity means people get what is fair, which may be different.

Everyone has the same chance to succeed, for example access to good schools and jobs.

Policies that make outcomes fairer can reduce incentives and output, but some can improve both.

A tax where the rate rises as income rises. It takes a larger share from high earners to fund public services and benefits.

A tax that takes a larger share of income from low earners. It is seen as less fair.

A payment given only to people on low incomes. It targets help at those most in need.

When extra pay leads to higher taxes and lost benefits, so take-home pay rises little or not at all.

It raises low pay, which boosts equity. If set too high, some firms may cut jobs or hours, reducing efficiency.

It improves chances for poorer people and builds skills, which raises productivity.

It is the reward for working more or gaining skills. Strong incentives encourage effort and output, improving efficiency.