IB Economics Topic 3.4.3 Measuring Economic Inequality Revision Notes (SL/HL)

IB Economics Topic 3.4.3 Measuring Economic Inequality Revision Notes (SL/HL) | RevisionDojo

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Since achieving equity is a desirable outcome for the economy, measuring the income and wealth inequalities present in it is essential.
There are two main tools economists use to measure and display income and wealth inequalities:
1. The Lorenz curve.
2. The Gini coefficient.

Note

Note that in theory the income shares can be divided into any percentage, depending on the needs.

The Lorenz curve

Definition

Lorenz curve

A graphical representation of the income inequality within an economy.

An economy's population can be divided into income quintiles:

Income quintiles divide an economy's population into groups of 20% of the population, ordered from poorest (least income-earners) to richest (highest income-earners).
The economy's population is therefore divided into five quintiles (five 20%), ranging from the poorest 20% to the richest 20%.
This way, it can be seen how different is the income distributed within a country (Table 1).

Quintile	Poorest 20%	Second 20%	Third 20%	Fourth 20%	Richest 20%
% of Total Income	5%	10%	15%	20%	50%
Income Decimal Index	0.05	0.1	0.15	0.2	0.5

Table 1 above shows how:
1. The poorest 20% only earns 5% of the total income.
2. The second 20% earns 10% of the total income.

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Note

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Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

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Since achieving equity is a desirable outcome for the economy, measuring the income and wealth inequalities present in it is essential.
There are two main tools economists use to measure and display income and wealth inequalities:
1. The Lorenz curve.
2. The Gini coefficient.

Note

Note that in theory the income shares can be divided into any percentage, depending on the needs.

The Lorenz curve

Definition

Lorenz curve

A graphical representation of the income inequality within an economy.

An economy's population can be divided into income quintiles:

Income quintiles divide an economy's population into groups of 20% of the population, ordered from poorest (least income-earners) to richest (highest income-earners).
The economy's population is therefore divided into five quintiles (five 20%), ranging from the poorest 20% to the richest 20%.
This way, it can be seen how different is the income distributed within a country (Table 1).

Quintile	Poorest 20%	Second 20%	Third 20%	Fourth 20%	Richest 20%
% of Total Income	5%	10%	15%	20%	50%
Income Decimal Index	0.05	0.1	0.15	0.2	0.5

Table 1 above shows how:
1. The poorest 20% only earns 5% of the total income.
2. The second 20% earns 10% of the total income.

Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

IB Economics 3.4.3 Measuring Economic Inequality Notes

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

The Lorenz curve

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The Lorenz curve

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