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 earms the same income, and the total annual income in the economy is $500,000,000. Suppose that in 1998, the poverty line is set at an annual income of $40,775 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. Share of Total Income in Perkopia (Percent) Year Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Highest Quintile 1998 3.0 8.1 14.0 21.7 53.2 2004 3.5 8.8 14.8 22.0 50.9 2010 3.8 9.5 15.4 22.7 48.6 2016 4.0 10.0 16.5 24.0 45.5 The data in the table suggest that there was income inequality from 1998 to 2016.
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 earms the same income, and the total annual income in the economy is $500,000,000. Suppose that in 1998, the poverty line is set at an annual income of $40,775 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. Share of Total Income in Perkopia (Percent) Year Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Highest Quintile 1998 3.0 8.1 14.0 21.7 53.2 2004 3.5 8.8 14.8 22.0 50.9 2010 3.8 9.5 15.4 22.7 48.6 2016 4.0 10.0 16.5 24.0 45.5 The data in the table suggest that there was income inequality from 1998 to 2016.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Income inequality and the poverty rate:
NOTE: read the problem questions carefully and answer all accordingly MAKE SURE THEY ARE EASY TO READ, THX :)
NOTE: here are options for the blank questions so u know the choices
The data in the table suggest that there was _____ (an increase in OR a decrease in OR no change in OR no evidence of)
Using the information in the previous table, the poverty rate in Perkopia in 1998 is ______ (10%, 20%, 40%, 50% OR 60%)
In the year 1998, the poverty rate after the introduction of the welfare program in Perkopia is _____ (10%, 20%, 40%, 50% OR 60%)
Transcribed Image Text:Complete the following table to help you determine the poverty rate in Perkopia in 1998. 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 40775.
Share of Income in 1998
Total Income
Individual Income
Quintile
(Percent)
(Dollars)
(Dollars)
Below Poverty Line?
Lowest
3.0
15,000,000
7,500
Second
8.1
40,500,000
20,250
Middle
14.0
35,000
Fourth
21.7
108,500,000
Highest
53.2
266,000,000
133,000
Using the information in the previous table, the poverty rate in Perkopia in 1998 is
Suppose that the government introduces a welfare program in which any individual with an income of less than $40,775 per year receives a lump-sum
transfer payment of $10,000 from the government. Assume that, in the short run, there is no change in labour supply behaviour among the people in
Perkopia.
In the year 1998, the poverty rate after the introduction of the welfare program in Perkopia is
Again, suppose the government introduces a welfare program in which any individual with an income of less than $40,775 receives a lump-sum
transfer payment of $10,000 from the government. Valerie, a resident of Perkopia who currently earns an income of $40,610, has the opportunity to
work overtime and earn an additional $1,500 this year.
Which of the following statements are correct? Check all that apply.
O The $10,000 in aid presents a disincentive for Valerie to make more than $40,775 per year.
O valerie would gain more income by turning down the overtime than she would if she accepted the overtime.
O Valerie may accept the overtime if she feels that taking it will increase the chances of her receiving a significant promotion.
Transcribed Image Text: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 1998, the poverty line is set at
an annual income of $40,775 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.
Share of Total Income in Perkopia
(Percent)
Year
Lowest Quintile
Second Quintile Middle Quintile Fourth Quintile
Highest Quintile
1998
3.0
8.1
14.0
21.7
53.2
2004
3.5
8.8
14.8
22.0
50.9
2010
3.8
9.5
15.4
22.7
48.6
2016
4.0
10.0
16.5
24.0
45.5
The data in the table suggest that there was
income inequality from 1998 to 2016.
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