The concept of distributive justice used in welfare economics. Equity is a general concept that can be given alternative meanings when formalized. As a general concept it refers to the belief that the distribution of economic welfare matters, and that increasing the equality of distribution is a laudable objective. The degree to which equity should be pursued by a policy-maker depends on the rate at which efficiency has to be sacrificed to achieve equity, and on social preferences as summarized in the social welfare function. One formalization is the concept of horizontal equity: those who are equal should be treated equally. For example, when applied to taxation horizontal equity implies that consumers of equal ability should pay the same amount of tax. A second formalization is vertical equity: welfare should be transferred from those with high ability (who have the opportunity to earn high incomes) to those with lower ability. For example, high-ability consumers should pay relatively more tax.