Ch 16 Economic Inequality - Economic Inequality Chapter 16...

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Economic Inequality Chapter 16 1
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Measuring Economic Inequality Current Status
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Measuring Economic Inequality Definitions: Market Income: wage, interest, and profit earned by households in factor markets, before income taxes Money Income (as defined by the Census Bureau): market income plus payments to households by the government Lorenz Curve: graphs the cumulative percentage of income earned against the cumulative percentage of households. 3
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Lorenz Curve 10-Person Economy Cumulative Carol 80,000 Mike 70,000 Greg 60,000 Marsha 50,000 Peter 40,000 Jan 30,000 Bobby 25,000 Cindy 20,000 150,000 ≈ 39% 110,000 ≈ 28.6% 70,000 ≈ 18.2% 45,000 ≈ 11.7% 10,000 ≈ 2.6% 100 % 61.1 % 32.5 % 14.3 % 2.6 % Group all people into Quintiles:
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Lorenz Curve % of Income House Holds 20 40 60 80 100 20 40 60 80 100 (20,2.6) (40,14.3) (60,32.5) (80,61.1) (100,100)
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Causes of Income Distribution 6
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Economic Inequality Why is the distribution not equal? Human Capital
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This note was uploaded on 02/23/2012 for the course ECONOMICS 251 taught by Professor Kelly during the Summer '11 term at Purdue University-West Lafayette.

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Ch 16 Economic Inequality - Economic Inequality Chapter 16...

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