What does the Lorenz Curve illustrate?
The Lorenz Curve illustrates the distribution of wealth in a country, showing the cumulative percentage of total income received against the cumulative percentage of recipients.
How does the distance of the Lorenz Curve from the line of perfect equality relate to inequality?
The further the Lorenz Curve is from the line of perfect equality, the more unequal the distribution of wealth.
What is represented on the axes of a graph illustrating the market for flu vaccinations with externalities?
The x-axis represents the quantity of flu shots, and the y-axis represents the price, cost, or benefit.
On a graph of flu vaccinations with externalities, what do the MPC, MSB, and MPB curves represent?
MPC represents the marginal private cost, MSB represents the marginal social benefit, and MPB represents the marginal private benefit.
How are the market quantity (Qm) and the socially optimal quantity (Q*) identified on a graph of flu vaccinations with externalities?
Qm is at the intersection of MPB and MPC, while Q* is at the intersection of MSB and MPC.
What are the key differences between private costs/benefits and social costs/benefits?
Private costs and benefits only consider the impact on the individuals involved in the transaction, while social costs and benefits consider the impact on society as a whole.
How do progressive and regressive taxes differ in their impact on different income groups?
Progressive taxes take a higher percentage of income from higher earners, while regressive taxes take a higher percentage of income from lower earners.
What are the differences between rivalrous and non-rivalrous goods?
Rivalrous goods are consumed by one individual and cannot be consumed by another, while non-rivalrous goods can be consumed by multiple individuals simultaneously.
What are the differences between excludable and non-excludable goods?
Excludable goods allow providers to prevent consumption by those who do not pay, while non-excludable goods do not allow providers to prevent consumption.
Compare and contrast positive and negative externalities.
Positive externalities confer benefits on third parties, leading to underproduction, while negative externalities impose costs on third parties, leading to overproduction.
How does the unregulated quantity differ from the socially optimal quantity?
The unregulated quantity is what the market produces without intervention, which is often not socially optimal, while the socially optimal quantity is where MSB = MSC.
Define Social Efficiency.
When Marginal Social Benefit (MSB) equals Marginal Social Cost (MSC).
What is Market Failure?
When the free market doesn't produce the socially optimal quantity.
Define Negative Externality.
Costs imposed on a third party not involved in a transaction.
Define Positive Externality.
Benefits conferred on a third party not involved in a transaction.
What is a Private Good?
Rivalrous and excludable.
What is a Public Good?
Non-rivalrous and non-excludable.
Define Unregulated Quantity.
Quantity the market produces without government intervention.
Define Fair Return Quantity.
Quantity allowing firms to cover costs and earn a normal profit.
Define Socially Optimal Quantity.
Quantity where MSB = MSC.
Define Lorenz Curve.
A graph showing the distribution of wealth in a country.
Define Gini Coefficient.
A number between 0 and 1 measuring inequality.
Define Progressive Tax.
Higher earners pay a higher percentage of their income in taxes.
Define Regressive Tax.
Lower earners pay a higher percentage of their income in taxes.
