ch 23

Question 1

Personal Distribution of Income

Answer 1

Income divided among households/families

Question 2

Lorenz Curve

Answer 2

Shows income distribution. Cumulated percentage of families measured along horizontal axis and percentage of income measured along vertical axis.
Larger the gap between Lorenz curve and equality line the greater the degree of income inequality

Question 3

Transfer Payments

Answer 3

Government significantly redistributes income from higher to lower income households through taxes and transfer payments.

Question 4

Income Mobility

Answer 4

When individuals and households move up to higher or move down to lower quintile groups

Question 5

Income Inequality & Its Causes: 
1.Skills and Ability 
2.Education and 
Training 
3.Discrimination
4.	Preferences and Risks
5.	Unequal Distribution of Wealth
6.Market Power 
7.  Unions or professional organization

Answer 5

2. (In general, more education, higher income)

in education, hiring, training, and promotions

3 Women and minorities

4 Workers who are willing to work long hours at arduous jobs will tend to earn more.

Those willing to assume risk, e.g., entrepreneurs, are likely to earn more income.

5 Wealth reflects at a specific moment assets an individual has accumulated over time.
A retired person may have little income but vast amounts of accumulated wealth.

6. in product market lead to firm receiving monopoly profits.
7. restrict supply of labor, leading to higher than competitive wages

Question 6

Poverty

Answer 6

a situation in which a family’s basic needs are greater than its means of satisfying them. Poverty level income is defined by government agencies based on family size.

Question 7

Social Security

Answer 7

Federal pension program) is financed by a payroll tax of 6.2 percent levied on both the worker and the worker’s employer on the first $132,900 (2019) of wage income.

Question 8

Medicare

Answer 8

a Federal health insurance program for elderly and disabled. Financed by a 1.45% payroll tax levied on both the worker and worker’s employer (with no income limit).

Question 9

Unemployment Compensatio

Answer 9

sponsored in all fifty states in cooperation with Federal government. Size of payments and the number of weeks of coverage vary from state to state.
Typically 26 weeks with benefits averaging about $363 per week.

Question 10

Public Assistance Programs

Answer 10

Supplemental Security Income
Temporary Assistance for Needy Families (TANF)
Supplemental Nutrition Assistance Programs (SNAP)
Medicaid
Earned Income Tax Credit (EITC)

Question 11

Taste-for-Discrimination Model

Answer 11

Discrimination results from a preference or taste (race, gender, age, religion) they are willing to pay for.

Question 12

Discrimination Coefficient

Answer 12

a measure of the cost of prejudice. The monetary amount an employer is willing to pay to hire a preferred worker rather than a non-preferred worker.

Question 13

Prejudice Ratio

Answer 13

is ratio of non-preferred to preferred workers/wages

Question 14

Statistical Discrimination

Answer 14

people are judged based on the basis of the average characteristics of the group they belong to, rather than on their own personal characteristics or productivity. (ie. higher insurance rates for male than female teenagers

Question 15

Occupational Segregation: Crowding Model

Answer 15

suggests that women and minorities are systematically excluded from high-paying occupations and crowded into low-paying ones.