What is the meaning of distribution in economics?

In economics, distribution is the way total output, income, or wealth is distributed among individuals or among the factors of production (such as labour, land, and capital). In general theory and the national income and product accounts, each unit of output corresponds to a unit of income.

4. According to Prof. Seligman – “All wealth that is created in society finds its way to the final disposition of the individual, through certain channels or sources of income, this process is called distribution.” Thus, the theory of distribution deals with the distribution of income.

The modern theory of factor pricing provides a satisfactory explanation of the problem of distribution. It is known as the demand and supply theory of distribution. According to the modem theory of factor pricing, the equilibrium factor prices can be explained by the forces of demand and supply.

The macro theory of distribution deals with the determination of the aggregate rewards of various factors such as national income or employment. It studies the interrelationship of all the macroeconomic variables.

The classical economists recognized three ―factors‖ required in all production: land, labor and capital. The factors corresponded to three social classes: landowners, workers, and capitalists. … The classical economists wanted to figure out what share of national income (―wealth‖ in their terminology) went to each class.

The functional distribution of income refers to the amounts of income paid to various individuals or households. A single individual may receive income from more than one factor of production or from one source. … Thus factor pricing and income distribution are interrelated.

The theory of functional distribution, which attempts to explain the prices of land, labour, and capital, is a standard subject in economics. … Behind this lies the idea that a businessman demands inputs of land, labour, and capital because he needs them in the production of goods that he sells.

Both of these terms refer to the ways in which income is divided up within an economy. However, functional income distribution refers to the division between groups of people while personal income distribution refers to the division among individuals.

“Personal distribution (or: the ‘size distribution of income‘) relates to individual persons and their incomes. … Functional distribution or ‘factor share distribution‘ explains the share of total national income received by each factor of production.

Two of the most commonly used income distribution measures are the shares of aggregate household income received by each quintile and the Gini index.

A Lorenz curve is a graphical representation of the distribution of income or wealth within a population. Lorenz curves graph percentiles of the population against cumulative income or wealth of people at or below that percentile.

In economics, personal income refers to an individual’s total earnings from wages, investment enterprises, and other ventures. It is the sum of all the incomes received by all the individuals or household during a given period.

Detailed income sources were aggregated into five broad categories: Employment (wages and salaries), Self-employment (self-employment and farm), Property (dividends, interest, and rents), Transfer (alimony, child-support, worker’s compensation, education, financial assistance, public assistance and welfare, retirement, …

Key Takeaways Sources of personal income include money earned from employment, dividends and distributions paid by investments, rents derived from property ownership, and profit sharing from businesses. Personal income is generally subject to taxation.

In tills way it is the sum of earned incomes and transfer incomes received by private sector. … ADVERTISEMENTS: Thus, the concept of private income is broader than that of personal income because private income consists of personal income + profit tax + undistributed profit.

Private income is either: any type of income received by a private individual or household, often derived from occupational activities, or. income of an individual that is not in the form of a salary, wage, or commission (e.g. income from investments or renting land or other property).

Private income is referred to as the total of all the factors incomes and transfer earnings received by the private sector from all sources. Private income includes incomes generated from any type of occupational activities or any income that is received apart from salary or any type of commission.

Private Income = Income from domestic product accruing to private sector + Net factor income from abroad + All current Transfers. = Personal income + Corporate tax + Undistributed profit.

Meaning. Factor Income refers to an income that can be derived by selling inputs or means of production, i.e. land, labour, capital and entrepreneur. Transfer income refers to any income which a recipient receives without providing any goods, services or assets in return to the payer.