Textbook Notes (363,559)
Canada (158,426)
Economics (697)
Chapter 19

Economics 1021 Chapter 19 Notes

2 Pages
Unlock Document

Western University
Economics 1021A/B
Jeannie Gillmore

Chapter 19 Measuring Economic Inequity  Market income: Wage, interest, rent, and profit earned in factor markets before paying income taxes  Total income: Market income + cash payments to households by governments  After-tax income: Total income – tax payments by households to governments  Income Lorenz curve: Graphs the cumulative percentage of income vs the cumulative percentage of households o Provides a visual clue about the degree of income inequality by comparing it with a line of equality (what the curve would look like if everybody’s income were equal). o A more accurate measure of economic inequality than wealth distribution.  Wealth: Value of the thing that a household owns at a point in time o Wealth is much more unequally distributed than income. o This is partially because wealth does not include the value of human capital, while income measures income from all wealth.  Gini ratio: Ratio of the area between the line of equality and the Lorenz curve to the entire area beneath the line o If income is equally distributed, the ratio equals 0. o If one person has all the income and everybody else has none, the ratio equals 1. o In Canada, between 1976 and 2009, the Gini ratio increased from 0.37 to 0.45.  Poverty: A state in which a family’s income is too low to be able to buy quantities of food, shelter, and clothing that are deemed necessary. o Considered both an absolute and a relative concept. o Low-income cut-off: Income level below which a family normally spends 63.6% or more of its income on food, shelter, and clothing. The definition of poverty in Canada. o Sources of income, household type, age of householder, number of children, education and labour force status are the most important factors influencing incidence of low income. Sources of Economic Inequality  Human capital: o Human capital is costly to acquire including expenditures on tuition and textbooks, and forgone earnings due to time spent in education. The supply of professional jobs is smaller than the demand, and therefore the pay is high. o Middle-aged people also tend to have a larger skillset than younger or older generations, which explains a small portion of the inequality. o Low skill jobs can be easily replaced by improved information technology (decreasing demand), and schooling trends increase the supply of labour (increasing supply) decreasing wage. o High-skill jobs are
More Less

Related notes for Economics 1021A/B

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.