by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Ladder of Opportunity?Economic inequality is perhaps most troubling when it is not the result of effort or talent, but instead is determined by the circumstances under which a child grows up. One child attends a well-run grade school and high school and...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Lorenz Curve?The Lorenz Curve A Lorenz curve graphs the cumulative shares of income received by everyone up to a certain quintile. A Lorenz curve shows the cumulative share of population on the horizontal axis and the cumulative percentage of total income...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How to Measure Income Inequality?Measuring income inequality means dividing the population into various groups and then comparing the groups, a task that we can be carry out in several ways. Measuring Income Distribution by QuintilesOne common way of measuring income...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Public Safety Net?The U.S. government has implemented a number of programs to assist those below the poverty line and those who have incomes just above the poverty line, to whom we refer as the near-poor. Such programs are called the safety net, to...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Poverty Line?Poverty is measured by the number of people who fall below a certain level of income—called the poverty line—that defines the income one needs for a basic standard of living. The US poverty line has traditionally been based on the cost of a...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Income Inequality?Income inequality compares the share of the total income (or wealth) in society that different groups receive. For example, compare the share of income that the top 10% receive to the share of income that the bottom 10% receive.The labor...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Tragedy of Commons for Common Resources?There are some goods that do not fall neatly into the categories of private good or public good. While it is easy to classify a pizza as a private good and a city park as a public good, what about an item that is...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Role of Government in Paying for Public Goods?The key insight in paying for public goods is to find a way of assuring that everyone will make a contribution and to prevent free riders. For example, if people come together through the political process and...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Free Rider Problem for Public Goods?Private companies find it difficult to produce public goods. If a good or service is nonexcludable, like national defense, so that it is impossible or very costly to exclude people from using this good or service, then...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are some Government Approaches to Encouraging Innovation?The primary government approaches to encouraging innovation include: Intellectual property – Granting intellectual property rights, a firm is able to earn monopoly profits on its product for a period...
