Equity has several related meanings in economics. The basic accounting meaning of equity is the value of a property, over and above any claims, liens, or mortgages. The most familiar use of the term is in real estate. Say you buy a property worth $100,000, making a $35,000 down payment and taking a $65,000 mortgage. Before you make your first mortgage payment, your equity in that property is $35,000. With each mortgage payment, your equity increases by the amount of the mortgage you have paid off.
In corporate finance, equity has a related meaning. The owners’ equity in a company is determined by the formula “total assets minus total liabilities equals owners’ equity.”
These meanings of equity are essentially accounting concepts. Equity also has a slightly different meaning that appears in discussions of economic policy. Here, equity generally refers to the social fairness of a policy. Tax and welfare policies in particular are often discussed in terms of social justice