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What is Inequality?


Inequality simply means the state that lacks equality. This term can also be used in two different contexts, economics and mathematics.

In economics, inequality pertains to the distribution of resources to different sectors of the society. This shows the difference between the wages and income of the poor against the rich. Inequality also has a direct relation with poverty as countries with high inequality rate have high level of poverty and vice versa for countries with low level of inequality. In this case, inequality is measured in two ways:

1. S80/S20- this pertains to the ratio of the 20% of the population that has the highest income against the 20% of the population that has the lowest income. As the ratio goes higher, so is the inequality.

2. The Gini Coefficient- while S80/S20 only measures the top and bottom of the society’s income, Gini coefficient measures the full income distribution. If the coefficient will result to 0% (everyone receives the same income), it means that there is perfect equality with the income distribution. If it’s 100% it means that only one person holds the income of the whole nation. The higher the coefficient, the higher the inequality.

In studying inequality, two key points must be taken into account to have a more accurate result. These are:

a. Poverty and Wealth must be studied together- knowing the level of poverty is as important of learning the source, who controls and how the society’s wealth is being distributed to further determine the resolution needed for a specific nation.

b. Lack of Comparable Data- depending alone on income distribution only shows the tip of the iceberg as inequality covers not only the workers but also the people who manages the society’s resources.

In the context of Mathematics, inequality pertains to mathematical equations that has a statement of relationship such as greater than or less than between two numbers or algebraic expressions. Inequalities can also be presented as mathematical questions known as equations. For example, the triangle inequality states that the sum of the lengths of any two sides of a triangle is greater than or equal to the length of the remaining side. Most mathematicians rely on inequalities to prove their theorems.

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Posted by on Sep 28th, 2014 and filed under Business, Finance & Investing. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.