What does income inequality refer to?

Income inequality refers to the uneven distribution of income within a population. This concept encompasses the disparities in income levels that exist between different individuals or groups, which can result from various factors such as education, occupation, and individual circumstances. Income inequality can have significant implications for economic stability and social cohesion, influencing everything from consumer spending to access to education and healthcare.

In contrast to the correct answer, the total income of a household simply measures the collective earnings of all members and does not address how that income is distributed among individuals in a broader context. The equal distribution of wealth across all individuals contradicts the very idea of income inequality, as this scenario would imply that everyone earns the same amount, negating any disparities. Lastly, the difference between gross and net income pertains to tax calculations and does not directly relate to how income is shared among a population. Understanding income inequality is essential for analyzing economic policies and their effects on society.