Income Distribution, Poverty, And Discrimination As A Result Of Business
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This paper is a brief description of how income distribution, poverty, and discrimination are a direct result of business cycles. This paper will give supportive data and analyze the business cycles of capitalistic economies to determine if there is adequate income distribution in the American economy. With an analogy of the business cycles, we will see that because of these cycles, the same population groups are being targeted. Then, this paper will briefly discuss why the market system of supply and demand cannot eliminate the business cycle or help aid in the correct income distribution. Given this data, we will see why government intervention is inevitable and can be beneficial. In conclusion, this paper will list the economic consequences to the free market system of relying on government economic policy to resolve the business cycles.
The distribution of income is determined in a capitalistic system by the control over resources. Income distribution is basically a function of how wages and salaries are divided among members of society. There are a few ways we can look at the distribution of income in society; one ways is to divide families into six groups according to the annual income received. Once we have divided the families into these groups, we can compare them to the annual percentages of previous years in a way to see the change for the economic growth of society as a whole. Another way to look at income distribution is by comparing the total median income among families headed by different education levels, gender and age. When we look at this type of income distribution, we can see the results of education and gender play an important role in the total median income in a given year. The more education head of households making more than the less educated households, and the households led by male tend to make more than that of the households led by female.
Poverty is caused by a lack of skills needed to produce goods or services on the part of the poor. Poverty is defined as inadequate income to purchase three times the minimum economic food budget. There are two types of short-run anti-poverty measure in the form of cash transfers and in-kind transfers. Cash transfers include social security benefits and unemployment compensation. In-kind transfers are such things as food stamps, Medicaid and housing assistance. All of these short-run anti-poverty programs are designed to have tradeoffs between maximizing poverty relief, and maximizing the incentive to work. As a result, the interest is to minimize the cost of these poverty programs.
The Lorenz curve is a graph of the actual cumulative distribution of income compared to a perfectly equal cumulative distribution of income. The vertical axis measures the cumulative percentage of family income, and the horizontal axis measures the cumulative percentage of families from the poorest to the richest. This curve gives a detailed visual description of income distribution and an overall view of the income distribution of society as a whole. The Lorenz curve gives the economist a tool to compare other nations income distribution.
Business cycles are the alternating periods of economic growth and contradiction, which can be