Definition of Wealth
Wealth is a person's net worth, expressed as:
- wealth = assets − liabilities
The word "wealth" is often confused with "income". These two terms describe different but related things. Wealth consists of those items of economic value that an individual owns, while income is an inflow of items of economic value. (See Stock and flow.) The relation between wealth, income, and expenses is:
- change of wealth = income − expense.
A common mistake made by people embarking on a research project to determine the distribution of wealth is to use statistical data of income to describe the distribution of wealth. The distribution of income is substantially different from the distribution of wealth. According to the International Association for Research in Income and Wealth, "the world distribution of wealth is much more unequal than that of income."
If an individual has a large income but also large expenses, her or his wealth could be small or even negative.
The United Nations definition of inclusive wealth is a monetary measure which includes the sum of natural, human and physical assets.
Read more about this topic: Distribution Of Wealth
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