Inequality
In an ideal economy the total income received by the economy would be distributed evenly among the society that is to say everyone in the economy would receive a fair and equal share of income. Unfortunately it would be exceedingly difficult for any economy to achieve such an even amount of distribution, since its income is not always a fixed variable.
The level of uneven distribution in an economy is known as the level of inequality.
An easy way to measure the level of inequality in a country would be to divide the population of a country into groups beginning with the bottom 10%, the next 20% and so on until you reach the top 10%. This would show you the income ranges of these groups in a country as well as the giving a general idea of the different levels of distribution between these groups.
Poverty
In economics poverty is a relative concept. That is; one person’s poverty is another person’s wealthy.
The government sets a level of absolute income that if someone is below they are deemed to be in poverty.
The poverty rate is the percentage of family’s whose income is below the poverty line.
In Europe the measure for defining the poverty line is set at 60% of the median income. It is important to compare the data from the poverty rate with data on inequality in a country in order to understand a society’s real prosperity.