The Lorenz Curve Warm Up What are three

The Lorenz Curve Warm Up: What are three jobs that get high paying salaries? What are three jobs that get low paying salaries/wages?

What do people earn? • Income Distribution: – an economists way of studying wealth and how it is disbursed among the population; families are grouped together by income into five categories The Lorenz Curve An economic model that compares real income distribution of wealth as compared to perfect equality.

The Lorenz Curve al qu t. E Pe 40 rf ec 80 What would % OF socialism, or TOTAL perfect equality 60 INCOME look like? 50. 8 ity 100 e om c n I 27. 6 20 12. 6 3. 6 20 40 ap G e h T 60 z n e Cu e v r r o L 80 100 % OF TOTAL POPULATION

U. S. Lorenz Curves 1995 2000 2010 lit y % OF Pe rfe ct Eq ua TOTAL INCOME % OF TOTAL POPULATION What are these curves telling us about income distribution in the U. S. ?

Warm Up: What does Paris Hilton have that you do not have, and what do you have that Paris Hilton does not have? Why do some people make more then others?

Why is there Income Inequality? (1)Wealth – born into it (family) (2)Education – the more you have the more $$ you will earn (3)Ability ~ Skill ~ Talent ~ Beauty (4)Power – monopoly or political (5)Luck – pure dumb luck

Top Ten!! Biggest areas of consumer expense in USA 10. Education 9. Furniture/appliances 8. Clothing 7. Entertainment 6. Healthcare 5. Utilities – public services 4. Insurances & pensions 3. Food 2. Transportation 1. Housing

The Bottom 20% • Poverty: • families and individuals are defined as living in poverty if their incomes fall below certain levels. • current poverty level for a family of 4: $22, 050 • {however, at twice the poverty line – or $43, 000 for a family of four – a family is much closer to meeting its minimum needs. }

How does Gov’t Help? • • • Anti-poverty measures: Food Stamps Welfare Social Security Insurance Workfare WIC – women, infants, & children Medicaid College Loans Low Mortgage Rates – Public Housing

Measuring Health of our Economy • Gross Domestic Product (GDP): – The dollar amount of all final goods and services produced within a country’s national borders in a year. It measures our national output. Exclusions from the GDP – There are four types of products that are excluded from the GDP; this tells us that it is not a true reflection of U. S. economic activity. Page 343 in your text, list, define and write example. S of each one:

Be Ready for a Top Ten!!! What countries have the highest GDP? ?

Highest GDP 2010 10. Canada 9. Russia 8. Italy 7. Brazil 6. United Kingdom 5. France 4. Germany 3. Japan 2. China 1. United States

Top Ten Richest Countries, per capita 10. U. K. 9. Netherlands 8. Sweden 7. Switzerland 6. Denmark 5. Ireland 4. Iceland 3. Qatar 2. Norway 1. Luxembourg 10. Canada 9. Russia 8. Italy 7. Brazil 6. United Kingdom 5. France 4. Germany 3. Japan 2. China 1. United States

Top Ten Fun!! Countries with the most Billionaires 10. Canada – 23 9. Japan – 25 8. Switzerland – 27 7. Turkey – 35 6. England – 49 5. Germany – 49 4. India – 50 3. China – 78 2. Russia – 82 1. USA – 435!!!