Ch.14 Equity Flashcards
What is the mathematical expression of consumer surplus?
CS= Sum of (MB-P)
What is the mathematical expression of producer surplus?
PS = Sum of (P-MC)
What is equity?
- Fairness in society
- Fairness in income and opportunity
- Fairness is to ensure every people can enjoy the services or products.
What is Lorenz curve?
It is to show the relationship between the cumulative percentage of income and cumulative percentage of households.
What we cannot tell from the lorenz curve?
- Actual amount of income.
- The living standard of those countries.
What is Gini Coefficient?
It is to measure the disparity between low income group and high income group.
Does same Gini Coefficient mean the same Lorenz Curve?
No. Only the area is the same but the curve may not be the same. But same Lorenz curve mean same Gini Coefficient.
What are the limitation of measuring income inequality?
- Different household sizes.
- Difficult to collect income data.
- Different definitions of income.
- Ignore lifetime income.
- Ignore government policy.
H(DI)I(LI)G
Elaboration on different household sizes as one of the limitations of measuring income inequality.
Households earning the same amount of money may have different household sizes.
Elaboration on difficult to collect income data as one of the limitations of measuring income inequality.
Some households may conceal income data.
Elaboration on different definitions of income as one of the limitations of measuring income inequality.
Some people may only count income from full time job, some people may count income from transfer payment or investment.
Elaboration on ignore lifetime income as one of the limitations of measuring income inequality.
Some jobs may start with low income and will increase over time e.g. accountant.
Elaboration on ignore government policy as one of the limitations of measuring income inequality.
Some countries may have a better government policy. E.g. employment benefit, CSSA, transport allowance.
