Economics Chapter 12 and 14 review

Topics: Externality, Welfare economics, Market failure Pages: 5 (1103 words) Published: November 14, 2013


What you own minus what you includes pay checks or wages, gov check, or Owe (includes hat you have in thedividend check or profit from selling an Bank and assets you own)investment (can have neg. income)

Lorenz Curve= a graph of the actual cumulative distribution of income compared to a perfectly equal cumulative distribution of income *for the US, income is NOT equally distributed
*area between dots and line shows how unequal money is distributed

Absolute poverty:
 a dollar figure that represents some level of income per year required to purchase some minimum amount of goods and services essential to meeting a person’s basic needs

Relative poverty:
 level of income that places a person of family in the lowest 20% of all eprsons or families receiving income

The poverty line:
 the level of income below which a person or family considered to be poor
- in absolute terms it is based on the cost of a minimum diet multiplied by 3
~USDA—the low cost plan to feed a family of 4 costs $697.50 a month
($8,370 a year)

to be poor…..
Need to have income of $22,811 a year
Working minimum wage job ($7.50/hour, 40 hours/week)

Cash Transfers
Government programs that provide eligible people with cash payments needed to purchase basic needs Social Security (FICA)
Unemployment compensation
Temporary Assistance to Needy Families or TANF (states have broad discretion to determine eligibility and benefit levels. families can’t receive benefits for longer than 60 days, unwed teenage parents must stay in school and live at home, and people convicted of drug felonies cant receive TANF or food stamps. Non working adults must participate in comm. Service and must find work w/in 2 years, parents with kids under age 1 don’t have to find work asap)

In-Kind Transfers
Programs that raise the standard of living for the poor
Food Stamps
Medicare (federal government-sponsored healthcare program primarily for seniors) & (an insurance program. Medical bills are paid from trust funds which those covered have paid into. It serves people over 65 primarily, whatever their income; and serves younger disabled people and dialysis patients. Patients pay part of costs through deductibles for hospital and other costs. Small monthly premiums are required for non-hospital coverage. Medicare is a federal program. It is basically the same everywhere in the United States and is run by the Centers for Medicare & Medicaid Services, an agency of the federal government.) Medicaid (for low-income families and is managed by both the state and federal governments) & (health care like social security… provides medical services to eligible poor under age 65 who pass a means test. TANF families quality for Medicaid in all states. medical bills are paid from federal, state and local tax funds. It serves low-income people of every age. Patients usually pay no part of costs for covered medical expenses. A small co-payment is sometimes required. Medicaid is a federal-state program. It varies from state to state. It is run by state and local governments within federal guidelines.) Housing Assistance

How is welfare criticized?
> work disincentives easier to not work
> inefficiencies different agencies provide different money > inequalities different states have different types or options of assistance

Reform Proposals…
Negative Income Tax:
-plan under which families below a certain break-even level of income would receive cash payments that decreases as their income increases Workfare:
-recipients of government programs have to work to receive the benefits

What is discrimination?
*can effect the wages of certain groups
*they receive more or less income if there is discrimination in the labor market
 non whites and females earn less income than white males

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