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Economics 1,2 > Unit 2 AOS 2 > Flashcards

Unit 2 AOS 2 Flashcards

1
Q

What is factor income

A

-> arise due 2 result of productive activity, paid 2 factors of production, included in national income estimates
E.g- rent, wages, interest profits

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2
Q

What are transfer income

A

-> do x arise due to any productive activity, x paid 2 factors of production, excluded from national income estimates
E.g- scholarships 2 students, old age pensions, lotteries

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3
Q

What is the p.o.d b/n factor income + transfer receipts

A

Whether or not the income received is for rendering a productive service

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4
Q

What are the different types of incomes

A

Private / market income
Gross income
Disposable income
Social wage income
Final income
Discretionary income
Equivalised household income

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5
Q

What is private income

A

= received in market primarily as a result of individual making a contribution 2 production process

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6
Q

What is gross income

A

= private income + direct taxes levied by gov.t

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7
Q

What is disposable income

A

= gross income less direct taxes levied by gov.t

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8
Q

What is social wage income

A

= disposable income + indirect gov.t benefits provided in the form of g/s

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9
Q

What is final income

A

= social wage income less production / indirect taxes

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10
Q

What is discretionary income

A

= income available 4 consumption on g/s following the payment of unavoidable expenses

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11
Q

What is equivalised household income

A

= disposable income of a household adjusted 2 take into an account the size x composition of the household

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12
Q

What is wealth

A

= consists of assets or things of value owned by private individuals

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13
Q

What is the relationship between income and wealth

A

= as income inc -> inc money left over after essential consumption -> saved -> inc wealth which can inc if invested

pod = what each measures

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14
Q

What is nominal income

A

= number of $ of income received by an individual measured over a period of time + does x take into account its purchasing power

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15
Q

What is real income

A

-> = 2 a person’s nominal lvl of income after accounting 4 the impact of changes in general prices (inflation) = guide 2 it’s purchasing power

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16
Q

What is equality

A

= everyone has equal access 2 g/s + income

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17
Q

What is equity

A

= more related 2 fairness h/r equality is inc related 2 eveness

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18
Q

What is absolute poverty

A

= refers 2 ppl living in situation where they have insufficient income 2 purchase the basic g/s such as food, shelter + clothing

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19
Q

What is relative poverty

A

= exists when households have low incomes compared with what us needed 2 maintain an agreed reasonable L.S

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20
Q

What does the Henderson Poverty Line imply

A

= fixed proportion of av. household income + will inc over time as the nations income + wealth inc.

-> when falls below, means earning income that is insufficient 2 provide dignified s.o.l

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21
Q

What does dignified s.o.l mean

A

= households being able 2 afford the g/s that allow them 2 live in our affluent + modern society with some dignity + self respect

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22
Q

What is the effect of poverty on mLS

A
  • Impact health + edu 4 members of households
  • less likely 2 have financial means 2 support healthy diet, visit medical professionals / pay 4 needed medicines
  • less access 2 g/s
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23
Q

What is the affect of poverty on NMLS

A
  • -> less physical + mental health
  • poor economic outcomes impact ability 2 earn incomes + have inc mLS in future
  • inc in social unrest / antisocial behaviour
  • development of class system in society with inc attitude of “us vs them”
24
Q

Which indicators are used to measure income equality

A
  • Gross household income
  • Household disposable income
  • Equivalised household income
25
What is the Lorenz Curve
= diagrammatical representation of the degree of equality in the distribution of income or wealth
26
What is the gini coefficient
= number b/n 0 and 1 which provides indicator of degree of inequality in income distribution
27
What is the optimal level of inequality
= where total benefits of inequality just outweigh total costs + movement away from this lvl will see deterioration of national L.S -> optimum = 0.3-0.4 (0.3836)
28
What are causes of income inequality
1) Quality of human capital 2) Unemployment 3) Luck 4) Inheritance 5) Sovereign indebtedness
29
What is the quality of human capital
= difference in skills / abilities that are held by member of the workforce -> highest wages are received by those who supply labour where supply is less than demand -> Supply of labour is high relative 2 demand 4 labour t/f less remuneration
30
What is unemployment
= number of ppl actively seeking a job h/r x paid employment
31
What is luck
= some wealthy households gained fortune through luck unrelated 2 good investment choices, inheritance or any other factors E.g Taxlotto
32
What is inheritance
= most of wealthiest households in Aus have inherited at least a portion of their wealth which can be invested in various assets 2 generate income
33
What is sovereign indebtedness
= build of debt incurred by gov.t when gov.t spending > gov.t revenue
34
What does equity in distribution of income require
- Aus' have sufficient income 2 purchase those g/s that enables them 2 have a dignified s.o.l - X person / household in Aus are experiencing absolute poverty - Huge inequalities in incomes are avoided
35
Benefits of achieving equity - social
- less helplessness and despair - less M.H problems - less social unrest - reduction of class system - less conspicuous consumption t/f less divisive - less inequality of opportunity - less wealth inequality
36
Benefits of achieving equity - economic
- cost 2 gov.t dec b/c less provision of income support - S.T x dec 2 economic growth - prevent less AD as wealth of middle class drive AD
37
Costs of achieving equity - social
- less ppl motivated 2 be more creative / entrepreneurial in light of lower lvl of inequality - less individuals pursuing goal of inc income + wealth
38
Costs of achieving equity - economic
- -> quality of nation human capital less than what it would be if inequality occurred - Quality of nations capital stock can be less than would be if inequality occurred - -> less labour + capital productivity - less productivity -> higher prices + inflation - more inflation -> less AD - impaired economic growth
39
What are benefits of productive efficiency
1) improved international competitiveness + better balance of payment positions 2) inc in AD + eco growth 3) inc employment + dec rates of unemployment 4) inc national income lvls + boost 2 M.L.S 5) less rapid depletion of neutral resources 2 inc efficiency + less waste in production
40
What is a cost of productive efficiency
= some policies 2 produce productive efficiency can -> structural unemployment E.g replacing labour with machines
41
Benefits of Allocative Efficiency
- implied that "right" g/s being produced, consumed + society satisfaction is maximised + there is x mis allocation of resources - wellbeing of nation maximised as g/s produced are inc valuable + beneficial 4 pop of country
42
What is productive efficiency
= max output from given lvl of input
43
What is allocative efficiency
= only combination of allocated resources + production that provide max L.S of a nation
44
What is the p.o.d b/n allocative and technical efficiency
= what each maximises
45
What are progressive taxes
= those where marginal rates of tax is higher 4 upper income earners and less 4 lower income earners
46
What are regressive taxes
= applied uniformly, taking lrg % of income from lower earners than from higher earners
47
What are government measures to redistribute income more evenly
- Progressive taxes - Cash welfare benefits - Provision of free or subsidised gov.t services i.e health + edu - Setting min wage in labour market @ lvl above market equilibrium -> promote equity rather than efficiency
48
What are issues of government measures to redistribute income evenly
-> while improving equity, it reduces... - incentives 4 individuals 2 work harder + longer hrs - saying that it is needed 2 finance investment + grow productive capacity - motivation 2 improve skills, training + worker productivity - self reliance + encourage welfare dependency that = economic cost on those who are inc productive
49
What are indirect taxes
= regressive tax designed 2 achieve inc efficient allocation of resources by introducing price signals that ultimately deter the production + consumption of 'demerit goods' such as alcohol and tobacco
50
What are excise taxes
= regressive tax levied on demerit goods 2 help re-allocate production of less harmful products
51
What is GST
= 10% tax on most g/s -> more certainty + transparency which improved efficiency of tax system h/r x improve equity b/c regressive
52
How can promoting equity improve efficiency
1) government spending on education + training programs 2) government spending on health incentives 3) government measures 2 improve social inclusiveness
53
What is a market economy
= price / market usually operates x only 2 allocate resources efficiently h/r also help distribute income b/n individuals equitably
54
What are the 3 basic economic questions
- What and how much to produce - How to produce - For whom to produce
55
How are the 3 basic economic questions answered in income distribution
-> normally distribute higher incomes 2 most productive / efficient members of lab force + lower incomes 2 less valued / productive households -> create signals 2 owners of resources 2 help them use their talents in occupations that are financially most rewarding
56
What are the different types of market failures
1) weak competition 2) Asymmetric information 3) Negative externalities 4) Income inequality
57
How does the market cause inequality and inequity
-> labour market

Economics 1,2 (7 decks)

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