The document discusses income distribution, inequality, and the mechanisms through which income is allocated and redistributed within society. It covers the causes of income inequality, including globalization, technology, and social biases, while emphasizing the role of government policies in mitigating these issues through taxation and social transfers. Additionally, it explores the measurement of inequality using tools like the Lorenz curve and Gini coefficient, and outlines the objectives and methods of income redistribution.

1. BASIC MICROECONOMICS
FINALS

2. How much money do you have?
How much money does your
parent earn?
How much money do you earn?

3. Income Distribution and Inequalities

5. When you look around you, it’s obvious that
some people are richer than others. How many
are rich and how many are poor? How did it get
to be that way? Does it change over time, and if
so, how and why? What is the difference
between income and wealth? Not all happiness
comes from having a lot of money, so why is
there so much emphasis on making money,
anyway?

6. Income Distribution
• a statistical measure of how many people earn or receive various
amounts of income.
• Income can be in the form of:
• Wages
• Rents
• Dividends
• Interest
• Pensions
• Benefit payments
• Income from self employment
• Inheritance

7. Income Distribution
•Income can be earned income (from
employment, etc.) or
•Unearned income – inheritance, benefit
payments, pensions, etc.

8. Income Distribution
Distribution through the Market Mechanism
Payments to Factors of Production:
Income is earned based on the contribution of labor, capital,
and land to economic production:
• Labor: Wages and salaries are paid to workers based on their
skills, productivity, and hours worked.
• Capital: Returns such as interest, dividends, and capital gains
are earned by those who own financial or physical assets.
• Land: Rent is paid to landowners for the use of natural
resources.

9. Income Distribution
Non-Market Distribution Mechanisms
Government Redistribution Policies:
Governments play a role in redistributing income to reduce inequality
and support social welfare:
• Taxes: Progressive taxation systems impose higher taxes on higher
income brackets, redistributing wealth from richer to poorer groups.
• Social Transfers: Programs like pensions, unemployment benefits, and
conditional cash transfers provide direct income support to lower-
income households.
• Subsidies and Public Goods: Subsidies for housing, healthcare, and
education increase disposable income for lower-income groups.

10. Income Inequality
•Income inequality is the uneven distribution of
income among people in a society.
•refers to how unevenly income is distributed
throughout a population. The less equal the
distribution, the greater the income inequality.
Income inequality is often accompanied by
wealth inequality, which is the uneven
distribution of wealth.

11. Causes of Income Inequality
•Globalization:
The increase in trade among nations resulted in
the move of manufacturing and other jobs by
corporations to countries where labor costs were
cheaper.
Advances in Technology: certain workplace
technological advancements, such as automation,
have led to the loss of jobs for blue-collar workers
and lower wages for less educated workers.

12. Causes of Income Inequality
•Gender and Race Bias:
Income disparities have
always been clearly visible
for women and people of
color. It's widely
acknowledged that, for
example, male employees
typically earn more than
female employees in the
same job positions.

13. Causes of Income Inequality
•Education:
Workers with less than
a high-school education
experience less growth
in wages than those
with college educations
and post graduate
degrees.

14. Measurement of Inequality
•Lorenz Curve
•Graphical representation
of income distribution.
•Interpretation:
• The closer the curve is to
the 45-degree line, the
more equal the
distribution.

15. Measurement of Inequality
•Gini Coefficient
•Definition: A numerical
measure derived from the
Lorenz curve.
• Range: 0 (perfect equality) to
1 (perfect inequality).
•Uses: Comparing inequality
across countries or regions.

16. Measurement of Inequality
• Poverty Line
• Defines the minimum income
needed to meet basic needs.
• Measures:
• Absolute Poverty: Below the
fixed threshold.
• Relative Poverty: Compared
to the overall population's
income.

19. Income Redistribution
Income redistribution is the process of
transferring income from some individuals or
groups to others to reduce income
inequality. The goal is to improve the quality
of life and living standards for people, and to
reduce social problems like crime, unrest,
and intergroup tensions.

20. Income Redistribution
•Objectives of Redistribution
•Reduce poverty and inequality.
•Promote social cohesion and economic stability.
•Ensure equitable access to opportunities and
resources.

21. Income Redistribution
•Objectives of Redistribution
•Reduce poverty and inequality.
•Promote social cohesion and economic stability.
•Ensure equitable access to opportunities and
resources.

22. Policy Tools for Redistribution
1. Taxation:
• Progressive income taxes: Higher income earners pay a larger
percentage.
• Inheritance and wealth taxes to address intergenerational
inequality.
2. Social Transfers:
• Cash transfers: Unconditional or conditional (e.g., Pantawid
Pamilyang Pilipino Program, 4Ps).
• In-kind transfers: Subsidized housing, food programs, and
healthcare.

23. Policy Tools for Redistribution
3. Public Services:
•Free or subsidized education and healthcare to level
the playing field.
4. Minimum Wage Laws:
•Ensure fair pay and protect low-income workers.

24. QUIZ: TRUE OR FALSE
1. The Lorenz Curve shows the relationship between wealth and
income inequality.
2. A Gini Coefficient of 0 represents perfect equality in income
distribution.
3. Globalization has reduced income inequality worldwide by
equalizing wages.
4. Gender and racial bias are significant causes of income
inequality.
5. Income redistribution aims to promote social cohesion and
reduce poverty.

25. QUIZ: TRUE OR FALSE
6. Unearned income includes wages and salaries from
employment.
7. Poverty can only be measured in absolute terms, not relative
terms.
8. Public services like healthcare and education help reduce
income inequality.
9. A minimum wage law is designed to ensure fair pay for
workers.
10.Technology has only positive effects on income distribution.

26. QUIZ: IDENTIFICATION
11. The graphical representation used to measure income
distribution.
12.The numerical measure derived from the Lorenz Curve,
ranging from 0 to 1.
13.The process of transferring income from one group to
another to reduce income inequality.
14.The type of income earned from inheritance, pensions, or
benefits.
15.The economic phenomenon where trade shifts jobs to
countries with lower labor costs.

27. QUIZ: IDENTIFICATION
16.The measure defining the minimum income needed to
meet basic needs.
17.A policy tool where higher income earners pay a larger
percentage of their income as tax.
18.When people don’t have money to live with the national
standards.
19.When people don not have money to meet the basic
needs.
20.The economic factor causing wage disparities due to
advancements like automation.