This lecture will cover the material found in chapter 15 of Case and Fair, Principles of Economics, 7/e. In the last Chapter, we completed our discussion of market failure. We now have a basic understanding of how markets operate. We are well versed in evaluating the efficiency of markets. But there is more to evaluating a market than efficiency; equity is also an important consideration.
This chapter will examine how economists measure equity in the U.S. economy. We will also look at how equitable the income distribution presently is in the United States and ask ourselves if, and how, the government should redistribute income. By the end of this chapter, you should be able to answer the following questions:
1. How do Americans get most of their income?
2. How is income inequality measured?
3. How equal is the distribution of income in the U.S.?
4. Is there a specific cutoff point in defining poverty?
5. How has poverty in the U.S. changed in the last 30 years?
6. What are some theories about why our society chooses to redistribute income?
7. How does the U.S. government redistribute income?