In the first problem solving scenario, consider a Greek island with ten inhabitants. Answer the questions below. a) Plot the Lorenz curve for the income distribution: (5, 8, 15, 18, 23, 35, 48, 52, 66, 80) b) The government plans to implement a 10% flat tax on income for each inhabitant of the island. Plot the new Lorenz curve and verify if this policy has reduced the inequality among the population. Argue c) Imagine that after one year the government decides to implement instead a lump-sum tax equal to 10 for all inhabitants with an income above 30. Plot the new Lorenz curve and verify if this policy has reduced the inequality among the population. Argue d) Calculate the Giní index and the Sen index for the three income distributions used in parts (a), (b) and (c) when the poverty line is z=14. Discuss the values obtained. e) Is it possible for a government to pursue a poverty reduction target, but at the same time ending up increasing inequality? Justify your answer.

In the first problem solving scenario, consider a Greek island with ten inhabitants. Answer the questions below. a) Plot the Lorenz curve for the income distribution: (5, 8, 15, 18, 23, 35, 48, 52, 66, 80) b) The government plans to implement a 10% flat tax on income for each inhabitant of the island. Plot the new Lorenz curve and verify if this policy has reduced the inequality among the population. Argue c) Imagine that after one year the government decides to implement instead a lump-sum tax equal to 10 for all inhabitants with an income above 30. Plot the new Lorenz curve and verify if this policy has reduced the inequality among the population. Argue d) Calculate the Giní index and the Sen index for the three income distributions used in parts (a), (b) and (c) when the poverty line is z=14. Discuss the values obtained. e) Is it possible for a government to pursue a poverty reduction target, but at the same time ending up increasing inequality? Justify your answer.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter12: Income Distribution, Poverty, And Discrimination

Section: Chapter Questions

Problem 1SQP

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