ECON MICRO
5th Edition
ISBN: 9781337000536
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 18, Problem 1.2P
To determine
The Lorenz Curve with its significance.
Concept Introduction:
Lorenz curve - It is the graphical representation of income inequality.
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10) What does a Lorenz curve show? Show a Lorenz
curve for a country like the USA where there is a
difference between income of the population.
Below is a Lorenz Curve for a given country. Suppose its government establishes a 10% income tax on persons earning more than $500,000/year and uses the proceeds to subsidize secondary education. Show how the tax would affect income inequality by drawing the new Lorenz Curve.
Based on the information in the Lorenz curve above, which of the following is true? (number 4)
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- 6. Comparing Gini coefficients of different countries 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 purple, 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. 100 CUMULAT ME PERCENTAGE OF INCOME 8 8 0 Country X Country Y III Country Z IV 80 20 40 60 CUMULATIVE PERCENTAGE OF HOUSEHOLDS 100arrow_forwardA Lorenz curve is a graph whose axes measure the: a. total amount of income in dollars on one axis and the total number of individuals or families receiving that income or a lower one on the other. b. percentage of people (10 percent, 20 percent, etc.) on one axis and the percentage of total income received by the lowest 10 percent, the lowest 20 percent, etc., on the other. c. number of individuals or families receiving a certain income on one axis and the percentage of the total population represented by that number on the other. d. number of individuals or families in different occupations on one axis and the median income received in that occupation on the other. e. income classes (e.g., $0 to $1999 and $2000 to $3999) on one axis and the percentage of individuals or families in each such income class on the other.arrow_forward4 comparing weath inequality in the united states to egyptarrow_forward
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