Econ 201 Unit 3

poverty rate

the percentage of the population whose family income falls below an absolute level called the poverty line

in-kind transfers

transfers in the form of goods and services rather than cash

life cycle

the regular pattern of income variation over a person’s life

utility

satisfaction from circumstances

utilitarian poverty philosophy

the government should achieve the greatest good for the greatest number of people

diminishing marginal utility (poverty)

taking income from the rich has a lesser effect than giving it to the poor

liberal contractarianism poverty philosophy

believes the government should choose a just policy based on impartial observers, writing a social contract when you don’t know where you’ll land

maximin criterion

the government should aim to maximize the well-being of the worst-off member of society

libertarianism poverty philosophy

believes the government should punish crimes and enforce voluntary agreements but not redistribute income, everyone has the same opportunity to achieve, if the process is just, the resulting distribution is fair, no matter how unequal

welfare

government programs that supplement the incomes of the needy

negative income tax

collects revenue from high-income households and gives subsidies to low-income households

workfare

requires recipients to be employed before receiving the benefits

lorenz curve

figure of the cumulative share of total income earned by income percentiles. a perfectly equal society would produce a straight diagonal line

gini coefficient

ratio of the area between the equality line and the lorenz curve to the total area under the equality line

0: perfect equality - everyone earns the exact same

1: perfect inequality - one person earns all the income