Chapter 19

Economic Inequality

Measuring Economic Inequality

•

•

•

•

•

Market income equals the wages, interest, rent, and profit earned in factor markets before

paying income taxes.

Total income equals market income plus cash payments to households by governments.

After-tax income equals total income minus tax payments by households to governments.

The income Lorenz curve graphs the cumulative percentage of income against the cumulative

percentage of households.

The table shows the shows the percentage of income in each quintile group and the cumulative

percentage of households and income.

•

•

•

•

•

•

•

•

•

•

•

•

•

•

The Lorenz curve graphs the cumulative income shares against the cumulative household

percentages.

In this graph, the line of equality is the straight line running from zero to 100 percent.

Point A tells us that the 20 percent of the population with the lowest incomes earn 4.9 percent

of total income.

Point B tells us that the 40 percent of the population with the lowest incomes earn 15.5 percent

of the total income.

Point C tells us that the 60 percent of the population with the lowest incomes earn 31.8 percent

of total income.

Point D tells us that the 80 percent of the population with the lowest incomes earns 55.8

percent of total income.

And by comparing point D and point E, we can see that the richest 20 percent of the population

earn 44.2 percent of total income.

The figure on the right includes the Lorenz

curve for wealth with the Lorenz curve for

income.

Wealth is much more unequally distributed

than income.

If wealth and income are measured in a

consistent way, they both have the same

distribution.

Poverty is a state in which a family’s income is too low to be able to buy the quantities of food,

shelter, and clothing that are deemed necessary.

In Canada, poverty is measured in terms of a low-income cutoff.

The low-income cutoff is the income level, determined...

- Voyages chapter 19 questions
- International Economic chapter 1
- ACC 557 Homework Week 2 – Chapter 19 Problem 1
- CRJ 320 WK 9 QUIZ 9 CHAPTER 19 AND 20
- Economics Chapter 11: Answers to Questions and Problems
- CRJ 320 WEEK 9 QUIZ 9 CHAPTER 19 AND 20
- Mk 19
- Ias 19
- ACC 400 Week 3 E-Text Individual Assignments – Chapter 10 Questions 1, 7, 8, and 19, BE 10-1, BYP10-1, BYP11-10 & Internet Assignment 11-1
- Summer Reading on 19 Minutes