IB Economics 3.4 Economics of Inequality and Poverty Key Definitions

The inability to afford the basic goods and services required to meet essential needs, when measured in relation to a fixed poverty line that indicates the minimum income required to cover basic necessities.

The average total proportion of income paid as tax.

Tax paid to the government directly by the taxpayer (individual).

The degree of differences between an economy's individuals in their ability to satisfy their needs and wants due to monetary constraints.

The even distribution of resources, opportunities, and outcomes among individuals or groups within a society

Refers to the concept where there is a fair resource distribution.

A numerical representation of the information given by the Lorenz Curve, measuring income or wealth inequality on an index from 0 (perfect equality) to 1 (perfect inequality).

Skills, abilities, good health, and knowledge utilized by people to increase their productivity.

The monetary funds households earn in return for their factors of production: rent from land, wages for labour, interest from investments, and profits from entrepreneurship.

Taxes imposed on goods and services, paid to the government by sellers but ultimately borne by consumers.

Differences in life opportunities due to factors beyond an individual’s control.

A graphical representation of the income inequality within an economy.

The percentage of tax paid on the next dollar earned.

Goods that are desirable by society but are under provided by the market.

The inability to meet standard consumption needs. These standards can be absolute or relative.

The inability to afford the standard of goods and services considered typical in their society.

Mandatory payments made by households and firms, collected by governments.

Transfer payments are redistributions of income by the government to individuals or households without any exchange of goods or services.

Universal Basic Income (UBI) is a policy where the government provides a fixed amount of money to every citizen, regardless of their income or employment status.

The total value of someone's owned assets (savings, stocks, bonds, land, properties...) minus their debts.

Refers to the unequal levels of wealth that individuals own.