week 8 Flashcards
(25 cards)
what are the possible measures to use for inequality
income, wealth, permanent(average lifetime income), spending , intergenerational mobility
what is poverty line ?
an income level below which a family is defined to be in poverty
what is poverty rate?
the percentage of people whose family income is below the poverty line.
what is absolute poverty
judges poverty relative to the an absolute standard of living
what is relative poverty?
judges poverty relative to the material living standards of your society
what is the gini index/ coefficient?
measures the extent to which the distribution of income or consumption among individuals or households within an economy deviates from a perfectly equal distribution
what are ways the government try to reduce poverty?
progressive tax system, Social insurance (government-provided insurance against bad outcomes such as unemployment, illness, disability, or outliving your savings), Social safety net (cash assistance, goods and services provided by the government to better the lives of those at the bottom of the income distribution)
why is wealth/income redistribution a debate
Redistribution is costly because of administrative cost, higher taxes (reduce incentive to work) also increases tax avoidance or fraud
additionally diminishing marginal utility they get less utility the more redistribution.
why is there an argument for efficiency vs equality?
Efforts to equalize issues with distribution of income will increase well being but more tax and redistribution might be costly due to lack of incentive and tax evasion
Perfect equal outcomes would lead to production decreasing because everyone would get the same regardless of production
No redistribution- leads to lower taxes and high incentives to work so total production would rise. However sick and elderly would become vulnerable
how does demand for labour work?
if wage is too high employers hire fewer workers. If wage is too low employers stay open longer hours and sell more goods
how does supply for labour work?
if wage is too low, employees prefer to take other jobs. If wage is high workers will be high in quantity to work for that job
what does marginal product of labour mean
extra production that occurs from hiring an extra worker
/
p
how would you find where the equilibrium wage is in the labour market?
wage at marginal product of labour = marginal revenue product
what is the rational rule for employers
if MRP ( marginal revenue product is greater or equal to wage they should hire one more worker this is because the revenue generated by the additional worker exceeds the cost of hiring them
why is labour demand equal to marginal revenue product
Since the wage equals the marginal revenue product of labor, the labor demand is equal to the marginal revenue product of labor
how can derived demand shift the labour demand curve?
occurs because the demand for labour is derived from the demand for the stuff labour makes. If the demand for retail workers decreases then wage will also decrease
how can scale effect shift the labour demand curve?
means that the price of capital declines, you can produce output more cheaply, so you need more workers to produce more things
how can substitution effect shift the labour demand curve?
means that if you can replace labour with capital, you need fewer workers
what other factors can shift demand labour curve
Better or worse management and productivity gains
Nonwage benefits, taxes , subsidies
what is the rational rule for workers?
work one more hour as long as the wage is at least as large as the marginal benefit of another hour of leisure
what is income effect?
how people respond to changes in income and says higher income makes leisure less attractive
why would the labour supply shift to the left?
people may be induced to enter the workforce as the wage rises, existing workers may put in more hours as the wage rises ,some people may switch occupations to those with higher wages
what are 4 factors that may shift the labour supply curve ?
1- changes in wages in other occupations
2- changing number of potential workers
3- changing benefits of not working
4- nonwage benefits ,subsidies and income taxes
