econ 2 Flashcards
What is economic inequality?
Economic inequality refers to the unequal distribution of income, wealth, and resources among individuals or groups in a society.
What are the main causes of economic inequality?
Differences in education, access to capital, labor market conditions, globalization, technological change, and government policies.
How does globalization affect income inequality?
Globalization can increase inequality by favoring skilled labor and capital over low-skilled workers, leading to wage disparities.
What is the Gini coefficient?
A measure of income inequality ranging from 0 (perfect equality) to 1 (perfect inequality), often used to compare countries.
How do progressive taxes impact inequality?
Progressive taxation reduces income inequality by imposing higher tax rates on higher incomes, redistributing wealth.
What is the difference between absolute and relative poverty?
Absolute poverty refers to a lack of basic necessities like food and shelter. Relative poverty is when an individual’s income is significantly lower than the median income in society.
What is social mobility?
The ability of individuals or families to move up or down the economic ladder over time.
What factors influence social mobility?
Education, economic policies, family background, access to capital, and labor market conditions.
What is intergenerational mobility?
The extent to which an individual’s economic status is different from that of their parents.
How do labor unions affect income inequality?
Labor unions negotiate higher wages and better working conditions, reducing wage disparities.
What is the Lorenz curve?
A graphical representation of income or wealth distribution used to measure inequality.
What is economic rent?
Income earned without contributing to production, such as landowners charging high rents due to location advantages.
How does automation affect inequality?
Automation increases productivity but may replace low-skilled jobs, leading to wage polarization and job displacement.
What is the Great Gatsby Curve?
A graphical relationship showing that higher income inequality is associated with lower social mobility.
How does inflation affect income distribution?
Inflation disproportionately affects lower-income households, as they spend a larger portion of their income on essentials.
What is capital income?
Income generated from owning assets, such as dividends, interest, and capital gains.
What is labor income?
Income earned through wages, salaries, and work-related compensation.
What is the Kuznets Curve?
A hypothesis suggesting that inequality increases in early stages of economic growth but later declines as economies mature.
What is the role of inheritance in economic inequality?
Inheritance allows wealth to be passed down generations, reinforcing long-term economic disparities.
How does economic inequality impact political power?
Higher inequality often leads to unequal political influence, where wealthier individuals shape policies to their advantage.
What is market failure?
A situation where markets do not allocate resources efficiently, leading to problems like monopolies or pollution.
What is an externality?
A cost or benefit of an economic activity that affects third parties not directly involved in the transaction.
What is the Tragedy of the Commons?
A situation where individuals overuse a shared resource, leading to its depletion due to lack of private ownership.
What is asymmetric information?
A situation where one party in a transaction has more or better information than the other, leading to inefficiencies.
