The Distribution of Wealth and Income. Poverty A relative term that compares what personal wealth people have in a given area.

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Presentation transcript:

The Distribution of Wealth and Income

Poverty A relative term that compares what personal wealth people have in a given area

Poverty A relative term that compares what personal wealth people have in a given area Poverty in the US is not the same as poverty in other countries

Poverty A relative term that compares what personal wealth people have in a given area Poverty in the US is not the same as poverty in other countries In other countries, that may mean starvation, In the US: below $23,550 per year for a family of 4

Poverty A relative term that compares what personal wealth people have in a given area Poverty in the US is not the same as poverty in other countries In other countries, that may mean starvation, In the US: below $23,550 per year for a family of 4 This # is calculated by identifying the cost to feed the family, multiplied by 3

US Poverty Line Problem: It is estimated that in America, the food expenses represent just 1/5 of the household budget (not 1/3) Other costs, housing, health care, childcare, transportation eat up a larger share of the budget Is the poverty line accurate?

Wealth vs. Income Wealth – the accumulation of value

Wealth vs. Income Wealth – the accumulation of value Income – is the flow of value

Wealth vs. Income Wealth – the accumulation of value Income – is the flow of value It is possible to have wealth (nice house) but have low income

Wealth vs. Income Wealth – the accumulation of value Income – is the flow of value It is possible to have wealth (nice house) but have low income It is possible to have high income, but no wealth (spent it all)

Income Distribution Who has the money???

Income Distribution Who has the money??? This can be measured by the Lorenz Curve which shows the distribution of wealth in the economy

Lorenz Curve Line of Perfect Equality Lorenz Curve Distribution of Income Family Groups % %0100

Income Distribution Who has the money??? This can be measured by the Lorenz Curve which shows the distribution of wealth in the economy The closer the Lorenz curve is to the line of equality, the more equal the distribution of income

Lorenz Curve (Near Equal) Line of Perfect Equality Lorenz Curve Distribution of Income Family Groups % %0100

Income Distribution Who has the money??? This can be measured by the Lorenz Curve which shows the distribution of wealth in the economy The closer the Lorenz curve is to the line of equality, the more equal the distribution of income The further from the line, the more unequal the distribution

Lorenz Curve (Unequal) Line of Perfect Equality Lorenz Curve Distribution of Income Family Groups % %0100