The Lorenz Curve

1
The Lorenz Curve

• Warm Up
• What are three jobs that get high paying
  salaries?
• What are three jobs that get low paying
  salaries/wages?

2
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.

3
The Lorenz Curve
100
100
What would socialism, or perfect equality look
like?
80
OF TOTAL INCOME
Perfect Equality
60
50.8
Income Gap
40
The Lorenz Curve
27.6
20
12.6
3.6
20
40
60
80
100
OF TOTAL POPULATION
4
U.S. Lorenz Curves
1995
2000
2010
OF TOTAL INCOME
What are these curves telling us about income
distribution in the U.S.?
Perfect Equality
OF TOTAL POPULATION
5
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?
6
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

7
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

8
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.

9
How does Govt Help?

• Anti-poverty measures
• Food Stamps
• Welfare
• Social Security Insurance
• Workfare
• WIC women, infants, children
• Medicaid
• College Loans
• Low Mortgage Rates Public Housing

10
Measuring Health of our Economy

• Gross Domestic Product (GDP)
• The dollar amount of all final goods and services
  produced within a countrys 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
  exampleS of each one

11
Be Ready for a Top Ten!!!

• What countries have the highest GDP??

12
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

13
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
14
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!!!