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

See similar textbooks

Similar questions

Table 15.9 shows the share of income going to each quintile of the income distribution for the United Kingdom in 1979 and 1991. Use this data to calculate what the points on a Lorenz curve would be, and sketch the Lorenz curve. How did inequality in the United Kingdom shift over this time period? How can you see the patterns in the quintiles in the Lorenz curves?
Using two demand and supply diagrams, one for the low-wage labor market and one for the high-wage labor market, explain how information technology can increase income inequality if it is a complement to high-income workers like salespeople and managers, but a substitute for low-come workers like file clerks and telephone receptionists.
Cumulative percentage of income 90 80 70 60 50 40 30 20 10 O d 40 20 60 80 Cumulative percentage of population If the area of inequality (area between the line of perfect equality and the Lorenz Curve) equals 0.35 and the area beneath the line of perfect equality (given by OAB in the diagram) equals 0.7, calculate the Gini coefficient. A O AOS о в. 0,6 OC. It is impossible to calculate with the information provided. OD. 0,5 100
-Suppose Country A and Country B have the followingpopulation and income distributions: Draw a Lorenz Curve for each country. Additionally, comment on which country ismore unequal.
3. Comparing Gini coefficients of different countries Aa Aa The following diagram shows the Lorenz curves for three countries. Country X's Lorenz curve is shown in blue, Country Y's Lorenz curve is shown in red, and Country Z's Lorenz curve is shown in green. Region I is the area above Country X's Lorenz curve and below the 45-degree line. Region II is the area below Country X's Lorenz curve and above Country Y's Lorenz curve. Region III is the area below Country Y's Lorenz curve and above Country Z's Lorenz curve. Region IV is the area below Country Z's Lorenz curve. INCOME (Cumulative percent) 100 80 60 40 20 0 The Gini coefficient for Country Z is given by Couny X 20 Country Y Country Z 11 III 60 IV 40 100 HOUSEHOLDS (Cumulative percent) 80 has the highest Gini coefficient.
Questions Explain three methods of measuring the income inequality of a nation? Page 3 other 2 pages in the pic As in the case of income distribution, calculation of wealth distribution is done by different entities using different measurements, resulting in a disparity in outcomes. In fact, commonly, wealthis narrowly defined as financial wealth—namely, cash on handand the money value of tangible and nonliquid assets. Even justthe market valuation of financial portfolios is commonly used todefine financial wealth. However, some may extend the definitionto include the value of income streams and insurance rights that,for the most part, cannot be transacted or encumbered. Theseinclude Medicare, Medicaid, and Social Security. When suchtransfers and public assistance are included, the poor and manyelderly could benefit, reducing the wealth disparity (Galbraith2016). To obtain net wealth, the value of the debts are subtractedsubtracted from the value of the assets. Galbraith stated…
5- Calculate Gini coefficient for a country with the following deciles in income share data: Country X: 30 (richest quantile) 20 What is the area under the Lorenz Curve? Please show your diagram. 10 5 5 5 5 3 2
Below is a Lorenz Curve for a given country. Suppose its government establishes a 10% income tax on persons earning more than $500,000 per year and uses the proceeds to subsidize secondary education. Show how the tax would affect income inequality by drawing the new Lorenz Curve.
The values in the table reflect the percentages of pre-tax-and transfer income. 22. Refer to Table 20-1. The trend in income inequality from 1980 to 2010 is 23. Refer to Table 20-1. If the distribution of income were completely equal, what percentage of income would the bottom fifth of the population earn? 24. A government policy aimed at protecting people against the risk of adverse events is called
If the area between the diagonal line of absolute equality and the Lorenz curve is greater for China than for the United States, we can conclude that the Distribution of income in China is less equal than in the United States. Relative distributions of income in the two countries are the same. O Distribution of income in China is as equal as in the United States. O Distribution of income in China is closer to being equal than in the United States.
1. Define the concept of absolute poverty and Identify FOUR (4) measures undertaken by the government to eradicate rural poverty.
QUESTION 43 The Gini coefficient can be approximated from the Lorenz curve by the g=A/(A+B), where A is the area between the Lorenz curve and the 45-degree line and A +B is the area under the 45-degree line. Consider a population with three members and an aggregate income of 100. Which of the following statements are correct? O When the incomes are (50, 50, 0), the approximated Gini coefficient is 0.5. When the incomes for the thre members are (100/3, 100/3, 100/3), the approximate Gini coefficient is 0. O When the incomes are (100, 0, 0), the approximated Gini coefficient is 1. O A gini coefficient of 1 implies complete equality.