6.5 Inequality

Define measures of economic inequality in income and wealth.

• Income levels and poverty rates vary greatly both across and within groups (e.g., age, gender, race) and countries.
• The Lorenz curve and Gini coefficient are used to represent the degree of inequality in distributions and to compare distributions across different countries, policies, or time periods. Exclusion: Drawing the Lorenz curve and calculating Gini coefficients are beyond the scope of the course and the AP Exam.
• Enduring understanding POL-5: Market outcomes can result in income inequality.

Explain sources of income and wealth inequality.

• Each factor of production receives the value of its marginal product, which can contribute to income inequality.
• Sources of income and wealth inequality include differences in tax structures (progressive and regressive tax structures), human capital, social capital, inheritance, effects of discrimination, access to financial markets, mobility, and bargaining power within economic and social units (firms, labor unions, and families).
• Enduring understanding POL-5: Market outcomes can result in income inequality.