Goals of Macroeconomics: Equitable Distribution of Income
In a purely competitive economy the government does not get involved. In Canada we want to make sure everyone is taken care of so we have government involvement. Equitable distribution of income is achieved through welfare programs and taxation. Transfer payments is when the government pays you (welfare).
It is measured by the Gini Coefficient which tell how much equality. Gini coefficient = A/A+B. The coefficient is 1 if perfect inequality and 0 if perfect equality.
The Lorenz curve is a graphical representation of the degree of income inequality that exists in a population. A point on the graph tells how much of the population and and how much of the income they have. If 70% of the population has 70% of income and 50% of the population has 50% of the income then there is equality. The closer the line is to the 45 degree mark the closer you are to equality and the closer the like is to the horizontal the more inequality.
Income quartile
percent of income
lowest(20%)
4.9%
second (40%)
10.6%
Third (60%)
16.3%
Forth (80%)
24.0%
highest (100%)
44.2%
The percent of income goes on the vertical and the % of population goes on the horizontal. The points are..(1) 4.9 (2) 4.9+10.6 (3) 4.9+10.6+16.3 and so on.
Dr. Stephanie Powers, "Goals"(Lecture, Donald School of Business, Red Deer AB, Winter 2012)
In a purely competitive economy the government does not get involved. In Canada we want to make sure everyone is taken care of so we have government involvement. Equitable distribution of income is achieved through welfare programs and taxation. Transfer payments is when the government pays you (welfare).
It is measured by the Gini Coefficient which tell how much equality. Gini coefficient = A/A+B. The coefficient is 1 if perfect inequality and 0 if perfect equality.
The Lorenz curve is a graphical representation of the degree of income inequality that exists in a population. A point on the graph tells how much of the population and and how much of the income they have. If 70% of the population has 70% of income and 50% of the population has 50% of the income then there is equality. The closer the line is to the 45 degree mark the closer you are to equality and the closer the like is to the horizontal the more inequality.
Dr. Stephanie Powers, "Goals"(Lecture, Donald School of Business, Red Deer AB, Winter 2012)