Ch 13 (Inequality)- Microeconomics

Vocabulary flashcards covering key definitions and economic principles from Chapter 13 on inequality, poverty, social insurance, and income redistribution.

Income

The money an individual or family receives over a specific period of time, such as a year.

Wealth

All the assets—including savings, cars, and houses—that an individual or family currently holds.

Quintile

One of five equal-sized groups into which a population is divided when sorted from lowest to highest income or wealth, each representing one-fifth ($20\%$) of the total.

Permanent Income

An individual's average lifetime income, rather than their income earned in a single given year.

Consumption Spending

The monetary value of the goods and services that an individual or household actually buys and consumes.

Intergenerational Mobility

The extent to which the economic status of children is independent of the economic status of their parents, reflecting inequality of opportunity.

Poverty Line

An income threshold set by the government below which a family is officially classified as living in poverty.

Absolute Poverty

A measure of the adequacy of resources relative to a fixed standard of living that assesses whether basic needs (such as food and water) are met, unchanging over time or across countries.

Relative Poverty

A measure of the adequacy of resources judged relative to the material living standards and prevailing economic conditions of one's contemporary society.

Social Insurance

Government-provided programs funded collectively by taxpayers that insure individuals against adverse events such as unemployment, illness, disability, or outliving savings.

Means-Tested Program

A social safety net program in which eligibility for benefits is determined by an applicant's level of income.

Progressive Tax System

A tax system in which individuals with higher incomes face higher tax rates on each additional dollar earned, ensuring higher earners pay a larger share of their total income in taxes.

Regressive Tax

A tax structure under which lower-income households pay a higher share of their income than higher-income households, such as general sales taxes.

Effective Marginal Tax Rate

The amount of each additional dollar of earnings that an individual loses due to higher taxes combined with the phaseout of government benefits.

Poverty Trap

A situation where an increase in earned income is offset or exceeded by the loss of government benefits and higher taxes, leaving the worker financially no better off or worse off.

Utility

An economic measure of overall well-being, satisfaction, or happiness.

Marginal Utility

The additional utility or well-being gained from acquiring one more dollar.

Diminishing Marginal Utility

The principle that each additional dollar acquired yields a smaller increase in utility than the preceding dollar.

Utilitarianism

The political philosophy holding that the government should design policy to maximize the total utility of all individuals in society.

Equality-Efficiency Trade-off

The economic conflict where government redistribution to achieve more equal incomes weakens work and investment incentives, potentially resulting in lower average incomes.

Ultimatum Game

An experimental two-player bargaining game where Player 1 proposes how to divide a sum of money with Player 2; if Player 2 accepts, both keep the proposed shares, but if Player 2 rejects, neither receives anything.

In-kind transfer

when the government provides goods or services instead of cash