Distribution of income is the fundamental problem studied in Macroeconomics. Macroeconomics is a branch of economics that focuses on the behavior and performance of an economy as a whole. It examines the aggregate variables such as output, employment, and inflation, and seeks to understand the factors that determine their levels and fluctuations.

The distribution of income refers to how the total income generated in the economy is allocated among different individuals or groups within the society. It examines the patterns of income inequality and the factors that contribute to it. This problem is of great importance as it has significant implications for social welfare and economic stability.

Understanding the distribution of income involves analyzing various factors and their impact on income inequality. Some of the key factors that affect income distribution include:

1. Labor Market Factors: The distribution of income is heavily influenced by the supply and demand for labor. Factors such as education, skills, experience, and productivity determine an individual's earning potential. Wage differentials between different occupations and industries also contribute to income inequality.

2. Capital Ownership: The ownership of capital assets, such as land, buildings, and financial assets, also plays a crucial role in income distribution. Those who own substantial capital resources tend to receive a larger share of the income generated in the economy.

3. Government Policies: Government policies, such as taxation and transfer programs, can have a significant impact on income distribution. Progressive taxation, where higher-income individuals are taxed at higher rates, can help reduce income inequality. Similarly, social welfare programs and income redistribution policies can help mitigate the effects of income inequality.

4. Market Structure: The structure of markets, including factors such as market concentration and monopoly power, can influence income distribution. In markets with a high degree of concentration, large firms may have more bargaining power, leading to higher profits and potentially exacerbating income inequality.

5. Globalization and Trade: Globalization and international trade can have both positive and negative effects on income distribution. While trade can lead to increased economic growth and job creation, it can also contribute to wage inequality and the displacement of certain industries and workers.

By studying the distribution of income, macroeconomists aim to gain insights into the factors that contribute to income inequality and its potential consequences. This knowledge can inform policymakers and help design appropriate measures to promote a more equitable distribution of income and improve overall social welfare.