1. Income inequality and the poverty rate The following table summarizes the income distribution for the town of Perkopia, which has a population of 10,000 people. Every individual w income group earns the same income, and the total annual income in the economy is $500,000,000. Suppose that in 2007, the poverty line an annual income of $42,350 for an individual. Year 2001 2007 2013 2019 Lowest Quintile Second Quintile 3.0 3.4 3.8 5.0 Share of Total Income in Perkopia (Percent) 8.6 9.4 9.7 11.0 The data in the table suggest that there was Middle Quintile Fourth Quintile 14.0 14.6 15.2 15.5 21.9 22.4 22.9 25.0 Highest Quintile 52.5 50.2 48.4 43.5 income inequality from 2001 to 2019. Complete the following table to help you determine the poverty rate in Perkopia in 2007. To do this, begin by determining the total income of all individuals in each quintile using the fact that total annual income in the economy is $500,000,000. Next, determine the income of an individual in each quintile by dividing the total income of that quintile by the number of people in that quintile. (Hint: Recall that Perkopia has a population of 10,000 people.) Finally, determine whether the individual income for each quintile falls below the poverty line of $42,350.
1. Income inequality and the poverty rate The following table summarizes the income distribution for the town of Perkopia, which has a population of 10,000 people. Every individual w income group earns the same income, and the total annual income in the economy is $500,000,000. Suppose that in 2007, the poverty line an annual income of $42,350 for an individual. Year 2001 2007 2013 2019 Lowest Quintile Second Quintile 3.0 3.4 3.8 5.0 Share of Total Income in Perkopia (Percent) 8.6 9.4 9.7 11.0 The data in the table suggest that there was Middle Quintile Fourth Quintile 14.0 14.6 15.2 15.5 21.9 22.4 22.9 25.0 Highest Quintile 52.5 50.2 48.4 43.5 income inequality from 2001 to 2019. Complete the following table to help you determine the poverty rate in Perkopia in 2007. To do this, begin by determining the total income of all individuals in each quintile using the fact that total annual income in the economy is $500,000,000. Next, determine the income of an individual in each quintile by dividing the total income of that quintile by the number of people in that quintile. (Hint: Recall that Perkopia has a population of 10,000 people.) Finally, determine whether the individual income for each quintile falls below the poverty line of $42,350.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1. Income inequality and the poverty rate
The following table summarizes the income distribution for the town of Perkopia, which has a population of 10,000 people. Every individual within an
income group earns the same income, and the total annual income in the economy is $500,000,000. Suppose that in 2007, the poverty line is set at
an annual income of $42,350 for an individual.
Year Lowest Quintile Second Quintile
2001
2007
2013
2019
3.0
3.4
3.8
5.0
Share of Total Income in Perkopia
(Percent)
8.6
9.4
9.7
11.0
The data in the table suggest that there was
Middle Quintile Fourth Quintile
14.0
14.6
15.2
15.5
21.9
22.4
22.9
25.0
Highest Quintile
52.5
50.2
48.4
43.5
income inequality from 2001 to 2019.
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Complete the following table to help you determine the poverty rate in Perkopia in 2007. To do this, begin by determining the total income of all
individuals in each quintile using the fact that total annual income in the economy is $500,000,000. Next, determine the income of an individual in
each quintile by dividing the total income of that quintile by the number of people in that quintile. (Hint: Recall that Perkopia has a population of
10,000 people.) Finally, determine whether the individual income for each quintile falls below the poverty line of $42,350.
Transcribed Image Text:Quintile
Lowest
Second
Middle
Fourth
Highest
Share of Income in 2007
(Percent)
3.4
9.4
14.6
22.4
50.2
Total Income
(Dollars)
Individual Income
Using the information in this table, the poverty rate in Perkopia in 2007 is
(Dollars)
Suppose that the government introduces a welfare program in which any individual with an income of less than $42,350 per year receives a lump-sum
transfer payment of $2,000 from the government. Assume that, in the short run, there is no change in labor-supply behavior among the people in
Perkopia.
In the year 2007, the poverty rate after the introduction of the welfare program in Perkopia is
Which of the following statements are correct? Check all that apply.
Below Poverty Line?
Again, suppose the government introduces a welfare program in which any individual with an income of less than $42,350 receives a lump-sum
transfer payment of $2,000 from the government. Sam, a resident of Perkopia who currently earns an income of $41,884, has the opportunity to work
overtime and earn an additional $1,900 this year.
The $2,000 in aid presents a disincentive for Sam to make more than $42,350 per year.
Sam may accept the overtime if he feels that taking it will increase the chances of his receiving a significant promotion.
Sam would gain more income by turning down the overtime than he would if he accepted the overtime.
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