sparknotes
Income Distribution
Terms
Buyer
-
Someone who purchases goods and services from a seller for money.
Competition
-
In a market economy, competition occurs between large numbers of buyers
and sellers who vie for the opportunity to buy or sell goods and
services. The competition among buyers means that prices will never fall very
low, and the competition among sellers means that prices will never rise very
high. This is only true if there are so many buyers and sellers that none of
them has a significant impact on the market equilibrium.
Equilibrium Price
-
The price of a good or service at which quantity supplied is equal to
quantity demanded. Also called the market-clearing price.
Gini Coefficient
-
Numerical measurement between 0 and 1 of income equality; calculated by
dividing the area between the Lorenz curve and the equal distribution curve
by the area beneath the equal distribution curve.
Goods and Services
-
Products or work that are bought and sold. In a market economy,
competition among buyers and sellers sets the market
equilibrium, determining the price and the quantity sold.
Income Distribution
-
Refers to how evenly the total amount of income in an economy is divided between
members of the workforce.
Income Mobility
-
Refers to the ease with which members of the workforce can move between levels
of economic prosperity.
In-kind Transfer
-
Indirect means of redistributing income; gives low income workers goods or
vouchers for goods instead of giving them direct cash payments.
Lorenz Curve
-
Curve that plots out the cumulative percentage of income earned by segments of
the workforce, as compared to a straight-line curve that represents perfectly
equal income distribution. Used to calculate the Gini coefficient.
Market-Clearing Price
-
The price of a good or service at which quantity supplied is equal to
quantity demanded. Also called the equilibrium price.
Market Economy
-
An economy in which the prices and distribution of goods and services are
determined by the interaction of large numbers of buyers and sellers who
have no significant individual impact on prices or quantities.
Market Equilibrium
-
Point at which quantity supplied and quantity demanded are equal, and prices are
market-clearing prices, leaving no surplus or shortage.
Seller
-
Someone who sells goods and services to a buyer for money.
Shortage
-
Situation in which the quantity demanded exceeds the quantity supplied for a
good or service; price is below equilibrium price.
Surplus
-
Situation in which the quantity supplied exceeds the quantity demanded
for a good or service; price is above equilibrium price.
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