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Principles of Microeconomics

Stevenson, Betsey;Wolfers, Justin

Chapter 13

Inequality, Social Insurance, and Redistribution - all with Video Answers

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Chapter Questions

01:54

Problem 1

Discussions of inequality often focus on income inequality. What are two other measures of inequality - and why is it important to consider more than one measure?

Jiali Liu
Jiali Liu
Numerade Educator

Problem 2

In the United States, the richest quintile of the population receives 13 times as much income as the poorest quintile. However, the richest quintile only spends four times as much as the poorest quintile. What are some of the reasons that there is such a stark difference between income inequality and consumption inequality?

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Problem 3

Given your experience and what you've learned from the chapter, what factors lead to a high income? Which are under your control and which are not?

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05:49

Problem 4

. Explain whether the U.S. poverty line is an absolute or relative measure.

Akash M
Akash M
Numerade Educator

Problem 5

. When the original poverty line was created, not everyone who was in poverty had access to a phone or running water in their homes. What are some things you think are necessary to enjoy a reasonable standard of living today? How much do you think it would cost to achieve that reasonable standard of living?

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01:34

Problem 6

Two of your friends are in a heated debate. Elena says that the rich pay higher taxes, and Warren argues the rich pay lower taxes by cheating the system. Which of them is correct? Are there ways in which both of them are partially correct? Discuss.

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Erwin Antoni
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Problem 7

Several studies suggest that the availability of free or low-cost child care increases labor force participation, particularly for mothers. In other words, redistributing to low-income mothers by giving them access to low-cost child care leads them to work more hours. What does this insight say about whether greater equality always comes at a cost of lower efficiency?

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Problem 8

Imagine that you are preparing your will and are trying to decide how to divide your assets between your two grown children. Your daughter Tonya is a chemical engineer who earns a high income. Your son Terry opted out of college and went to work straight out of high school. Now Terry works in construction; he works just as hard as Tanya, but he is less affluent than she is. Elaborate on each of the following concepts about fairness and distribution illustrated in the chapter.
a. Split your wealth evenly between Terry and Tonya, because you always treat them equally.
b. Leave Terry your wealth to offset the income gap between him and his sister.
c. Leave your money to the child who you think deserves more money.
d. Tell your kids you'll leave your money to whoever does the most to take care of you in your old age.

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