Complete the following table to help you determine the poverty rate in Perkopia in 2004. 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 25300. Quintile Lowest Second Middle Fourth Highest Share of Income in 2004 (Percent) 3.4 9.0 14.6 22.0 51.0 Total Income (Dollars) 45,000,000 73,000,000 110,000,000 255,000,000 Individual Income (Dollars) 8,500 36,500 55,000 127,500 Using the information in the previous table, the poverty rate in Perkopia in 2004 is Which of the following statements are correct? Check all that apply. In the year 2004, the poverty rate after the introduction of the welfare program in Perkopia is Below Poverty Line? Suppose that the government introduces a welfare program in which any individual with an income of less than $25,300 per year receives a lump-sum transfer payment of $7,000 from the government. Assume that, in the short run, there is no change in labour supply behaviour among the people in Perkopia. PPPPP Again, suppose the government introduces a welfare program in which any individual with an income of less than $25,300 receives a lump-sum transfer payment of $7,000 from the government. Yvette, a resident of Perkopia who currently earns an income of $24,499, has the opportunity to work overtime and earn an additional $1,500 this year. The $7,000 in aid presents a disincentive for Yvette to make more than $25,300 per year. Yvette may accept the overtime if she feels that taking it will increase the chances of her receiving a significant promotion. Yvette would gain more income by turning down the overtime than she would if she accepted the overtime.
Complete the following table to help you determine the poverty rate in Perkopia in 2004. 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 25300. Quintile Lowest Second Middle Fourth Highest Share of Income in 2004 (Percent) 3.4 9.0 14.6 22.0 51.0 Total Income (Dollars) 45,000,000 73,000,000 110,000,000 255,000,000 Individual Income (Dollars) 8,500 36,500 55,000 127,500 Using the information in the previous table, the poverty rate in Perkopia in 2004 is Which of the following statements are correct? Check all that apply. In the year 2004, the poverty rate after the introduction of the welfare program in Perkopia is Below Poverty Line? Suppose that the government introduces a welfare program in which any individual with an income of less than $25,300 per year receives a lump-sum transfer payment of $7,000 from the government. Assume that, in the short run, there is no change in labour supply behaviour among the people in Perkopia. PPPPP Again, suppose the government introduces a welfare program in which any individual with an income of less than $25,300 receives a lump-sum transfer payment of $7,000 from the government. Yvette, a resident of Perkopia who currently earns an income of $24,499, has the opportunity to work overtime and earn an additional $1,500 this year. The $7,000 in aid presents a disincentive for Yvette to make more than $25,300 per year. Yvette may accept the overtime if she feels that taking it will increase the chances of her receiving a significant promotion. Yvette would gain more income by turning down the overtime than she would if she accepted the overtime.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
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 2004, the poverty line is set at
an annual income of $25,300 for an individual.
Note: This question uses quintiles, which are a statistical value of a data set that includes 20% of the population. This means that the population has
been divided into fifths, where the first quintile is the lowest 20% of the values of the variable of interest, and so on to the fifth quintile, which is the
highest 20% of the values.
Year
1998
2004
2010
2016
Lowest Quintile
3.2
3.4
3.8
4.0
Share of Total Income in Perkopia
(Percent)
Middle Quintile Fourth Quintile
Second Quintile
8.0
9.0
9.5
10.0
The data in the table suggest that there was
14.0
14.6
15.4
16.5
21.8
22.0
22.7
24.0
Highest Quintile
53.0
51.0
48.6
45.5
income inequality from 1998 to 2016.
Transcribed Image Text:Complete the following table to help you determine the poverty rate in Perkopia in 2004. 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 25300.
Quintile
Lowest
Second
Middle
Fourth
Highest
Share of Income in 2004
(Percent)
3.4
9.0
14.6
22.0
51.0
Total Income
(Dollars)
45,000,000
73,000,000
110,000,000
255,000,000
Individual Income
(Dollars)
8,500
36,500
55,000
127,500
Using the information in the previous table, the poverty rate in Perkopia in 2004 is
Which of the following statements are correct? Check all that apply.
In the year 2004, the poverty rate after the introduction of the welfare program in Perkopia is
Below Poverty Line?
Suppose that the government introduces a welfare program in which any individual with an income of less than $25,300 per year receives a lump-sum
transfer payment of $7,000 from the government. Assume that, in the short run, there is no change in labour supply behaviour among the people in
Perkopia.
PPPPP
Again, suppose the government introduces a welfare program in which any individual with an income of less than $25,300 receives a lump-sum
transfer payment of $7,000 from the government. Yvette, a resident of Perkopia who currently earns an income of $24,499, has the opportunity to
work overtime and earn an additional $1,500 this year.
The $7,000 in aid presents a disincentive for Yvette to make more than $25,300 per year.
Yvette may accept the overtime if she feels that taking it will increase the chances of her receiving a significant promotion.
Yvette would gain more income by turning down the overtime than she would if she accepted the overtime.
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