Microeconomics chapter 21 (Income Inequality, Poverty, and Discrimination)

five numerically equal groups used to measure income inequality

displays the quintile distribution of personal income

all households have but one zero income

the greater is the degree of income inequality

a numerical measure of the overall dispersion of income (higher ratios indicate more inequality)

income accounting period of one year is too short to be very meaningful

movement of individuals or households from one income quintile to another over time

provide specific goods or services rather than cash (Ex. Medicare, Medicaid, housing subsidies, subsidized school lunches, and food stamps. They are "incomelike" where consumers can purchase goods and services

government transfer payments

-ability
-education and training
-discrimination
-preferences and risks
-unequal distribution of wealth
-market power
-luck, connections, and misfortune

it is where land and capital resources are highly concentrated in the hands of a relatively small number of wealthy families

increasing demand by many firms for workers who are highly skilled and well-educated

-men and women who earn high wages tend to marry
-single or divorced women living alone

income equality maximizes total consumer satisfaction from any particular level of output and income

products that are valued the most - high marginal utility

1) it is justified because it results from differences in the quantity and quality of labor and other resources supplied by individuals to the economy
2) it is an unavoidable consequence of maintaining the incentives needed to motivate people to produce output and income year after year

greater income equality comes at the opportunity cost of reduced production and income. And greater production and income comes at the expense of less equality of income

condition in which a person or a family does not have the means to satisfy basic needs. Means include income, transfer payments, past savings, and property owned. /the percentage of the population living in poverty.

-black and hispanic families
-families headed by women
-people with little education and few labor skills
-those who are dysfunctional because of drug use, alcoholism, or mental illness

the Great Recession in December 2007

measuring by CONSUMPTION and not INCOME because impoverished people do receive benefits such as food stamps and rent subsidies

two programs in the U.S. income-maintenance system:
1) social insurance
2) public assistance, or "welfare"

partially replace earnings that have been lost due to retirement, disability, or temporary employment; also provides health insurance for the elderly

major social insurance program - a federal pension program that replaces part of the earnings lost when workers retire, become disabled, or die (covers over 90% of the workforce)

a federal insurance program that provides health insurance benefits to those 65 or older and people who are disabled

a federal-state social insurance program that makes income available to workers who are employed (typically lasts 26 weeks)

provide benefits to people who are unable to earn income because of permanent disabling conditions or who have no or very low income and also have dependent children ("means tests")

a federal program (financed by general tax revenues) that provides a uniform nationwide minimum income for the aged, blind, and disabled who are unable to work and who do not qualify for Social Security aid

the basic welfare program for low-income families in the U.S. The program is financed through general federal tax revenues and consists of lump-sum payments of federal money to states to operate their own welfare and work programs (it has greatly enhanced employment for single mothers with children under the age of 6)

formerly known as food stamp program - a federal program (financed through general tax programs) that permits eligible low-income persons to obtain vouchers that can be used to buy food. It is designed to provide all low-income Americans with a nutritionally adequate diet. Amount in EBT cards very inversely with family's earned income

a federal program (financed by general tax revenues) that provides medical benefits to people covered by the SSI and TANF programs

a refundable federal tax credit provided to low-income wage earners to supplement their families' income and encourage work

the practice of according people inferior treatment (ex. in hiring, occupational access, education and training, promotion, wage rate, or working conditions) on the basis of race, gender, or ethnicity

examines prejudice by using the emotion-free language of demand theory. It views discrimination as resulting from a preference or taste for which the discriminator is willing to pay

a prejudiced white employer behaves as if employing African-American workers would add a cost
Ww = Waa + d

people are judged on the basis of the average characteristics of the group to which they belong, rather than on their own personal characteristics or productivity (ex. younger males pay more insurance than younger females because males are more likely to get into accident, but that is unfair to those males who are less accident-prone than females)

the crowding of women, African Americans, and certain ethnic groups into less desirable, lower-paying occupations - is still apparent in the U.S. economy

look at the percentages of households in a series of income categories. the data in the table suggest a wide dispersion of household income and considerable inequality of income in the U.S.

= (area between Lorenz curve and diagonal/ total area below the diagonal)

= A(blue are) / A+B (blue + green area)

provides specific goods or services rather than cash. This includes things as Medicare, Medicaid, housing subsidies, subsidized school lunches, and food stamps.

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