Inequality, Poverty, and Discrimination

Read this chapter for a more detailed look at the topic of income inequality and discrimination in the labor markets as these are real examples of market failures. Attempt the "Try It" problems at the end of each section before checking your answers.

2. Income Inequality

2.3. Key Takeaways

  • The distribution of income can be illustrated with a Lorenz curve. If all households had the same income, the Lorenz curve would be a 45° line. In general, the more equal the distribution of income, the closer the Lorenz curve will be to the 45° line. A more bowed out curves shows a less equal distribution. The Gini coefficient is another method for describing the distribution of income.
  • The distribution of income has, according to the Census Bureau, become somewhat more unequal in the United States during the past 40 years.
  • The degree of mobility up and down the distribution of income appears to have declined in recent years.
  • Among the factors explaining increased inequality have been changes in family structure and changes in the demand for labor that have rewarded those with college degrees and have penalized unskilled workers.