wealth/income inequaility Flashcards
(15 cards)
What does income inequality measure?
It measures the disparity in income distribution among individuals or groups within an economy.
What does wealth inequality refer to?
It refers to the unequal distribution of assets (e.g., property, stocks, savings) among individuals or groups.
What is the Lorenz Curve?
The Lorenz Curve is a graphical representation of income or wealth distribution, showing the proportion of total income or wealth earned by cumulative percentages of the population.
What does the 45-degree line on a Lorenz Curve represent?
The 45-degree line represents perfect equality, where every individual or group has an equal share of the total income or wealth.
What does a Lorenz Curve that is closer to the 45-degree line indicate?
It indicates greater equality in income or wealth distribution.
What does a Lorenz Curve that is farther from the 45-degree line indicate?
It indicates greater inequality in income or wealth distribution.
What is the Gini Coefficient?
The Gini Coefficient is a numerical measure of income or wealth inequality, calculated from the Lorenz Curve. It ranges from 0 (perfect equality) to 1 (perfect inequality).
What does a Gini Coefficient of 0 represent?
A Gini Coefficient of 0 represents perfect equality in income or wealth distribution.
What does a Gini Coefficient of 1 represent?
A Gini Coefficient of 1 represents perfect inequality, where one individual or group holds all the income or wealth.
How is the Gini Coefficient calculated?
The Gini Coefficient is calculated by dividing the area between the Lorenz Curve and the 45-degree line by the total area under the 45-degree line.
If the Gini Coefficient is 0.25, what does this indicate about income or wealth inequality?
It indicates low inequality, with a relatively even distribution of income or wealth.
If the Gini Coefficient is 0.75, what does this indicate about income or wealth inequality?
It indicates high inequality, with income or wealth being more concentrated in the hands of a few individuals or groups.
What is the difference between income inequality and wealth inequality?
Income inequality refers to differences in earnings (salaries, wages, etc.), while wealth inequality refers to differences in assets (property, investments, savings, etc.).
How do taxes and redistribution policies affect income inequality?
Progressive taxes and redistribution policies (e.g., welfare, subsidies) can help reduce income inequality by redistributing wealth from higher-income individuals to lower-income individuals.
Why is the Gini Coefficient used to measure inequality?
The Gini Coefficient is used because it provides a single, quantifiable measure of inequality that can be compared across different populations and over time.
