Quintile Lowest Second Middle Fourth Highest Share of Income in 2012 (Percent) 3.0 8.2 14.0 21.8 53.0 Total Income (Dollars) Individual Income (Dollars) Using the information in the previous table, the poverty rate in Perkopia in 2012 is In the year 2012, 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? Suppose that the government introduces a welfare program in which any individual with an income of less than $40,850 per year receives a lump-sum transfer payment of $3,000 from the government. Assume that, in the short run, there is no change in labor-supply behavior among the people in Perkopia. 川川川川 Again, suppose the government introduces a welfare program in which any individual with an income of less than $40,850 receives a lump-sum transfer payment of $3,000 from the government. Charles, a resident of Perkopia who currently earns an income of $40,050, has the opportunity to work overtime and earn an additional $1,500 this year. Charles would gain more income by turning down the overtime than he would if he accepted the overtime. The $3,000 in aid creates a disincentive for Charles to earn more than $40,850 per year.
Quintile Lowest Second Middle Fourth Highest Share of Income in 2012 (Percent) 3.0 8.2 14.0 21.8 53.0 Total Income (Dollars) Individual Income (Dollars) Using the information in the previous table, the poverty rate in Perkopia in 2012 is In the year 2012, 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? Suppose that the government introduces a welfare program in which any individual with an income of less than $40,850 per year receives a lump-sum transfer payment of $3,000 from the government. Assume that, in the short run, there is no change in labor-supply behavior among the people in Perkopia. 川川川川 Again, suppose the government introduces a welfare program in which any individual with an income of less than $40,850 receives a lump-sum transfer payment of $3,000 from the government. Charles, a resident of Perkopia who currently earns an income of $40,050, has the opportunity to work overtime and earn an additional $1,500 this year. Charles would gain more income by turning down the overtime than he would if he accepted the overtime. The $3,000 in aid creates a disincentive for Charles to earn more than $40,850 per year.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Quintile
Lowest
Second
Middle
Fourth
Highest
Share of Income in 2012
(Percent)
3.0
8.2
14.0
21.8
53.0
Total Income
(Dollars)
Individual Income
(Dollars)
Using the information in the previous table, the poverty rate in Perkopia in 2012 is
In the year 2012, 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?
Suppose that the government introduces a welfare program in which any individual with an income of less than $40,850 per year receives a lump-sum
transfer payment of $3,000 from the government. Assume that, in the short run, there is no change in labor-supply behavior among the people in
Perkopia.
PAPPA
Again, suppose the government introduces a welfare program in which any individual with an income of less than $40,850 receives a lump-sum
transfer payment of $3,000 from the government. Charles, a resident of Perkopia who currently earns an income of $40,050, has the opportunity to
work overtime and earn an additional $1,500 this year.
Charles would gain more income by turning down the overtime than he would if he accepted the overtime.
The $3,000 in aid creates a disincentive for Charles to earn more than $40,850 per year.
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 2012, the poverty line is set at
an annual income of $40,850 for an individual.
Year
1994
2000
2006
2012
Lowest Quintile
4.0
3.8
3.4
3.0
Share of Total Income in Perkopia
(Percent)
Middle Quintile Fourth Quintile
Second Quintile
10.0
9.7
8.8
8.2
The data in the table suggest that there was
16.5
15.0
14.8
14.0
23.0
22.5
22.0
21.8
Highest Quintile
46.5
49.0
51.0
53.0
income inequality from 1994 to 2012.
Complete the following table to help you determine the poverty rate in Perkopia in 2012. 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 $40,850.
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