Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 18, Problem 2.2P
(a)
To determine
Identify the equality among income distribution in 2014 and 2015.
(b)
To determine
Identify the values of Gini coefficients in 2014 and 2015.
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Measuring Inequality: Consider the following (roughly measured) distribution of income in the
economy:
Share of Households
Cumulative Share of Income
1/4
1/12
1/2
1/4
3/4
3/8
1
1
a. Draw the Lorenz-curve for the economy.
b. Calculate the Gini-coefficient.
Below is a Lorenz Curve for a given country. Suppose its government cuts spending on Medicaid, Supplemental Nutrition Assistance Program and other aids to the poor. Show how the spending cuts would affect income inequality by drawing the new Lorenz Curve.
Chapter 18 Solutions
Principles of Economics (12th Edition)
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- What is measured on the two axes of a Lorenz curve?arrow_forwardWhat do you think is more important to focus on when considering inequality: income inequality or wealth inequality?arrow_forwardDescribe how a push for economic equality might reduce incentives to work and produce output. Then describe how a push for economic inequality might nut have such effects.arrow_forward
- Economists experience difficulties in accurately measuring income inequality because of which of the following? Choose one or more: A. The Gini index calculation discriminates against the poor in developed economies. B. Government programs are inefficient and difficult to monitor. C. large, underground economies that lack the reporting of income to the government D. Measurements tend to use "before tax" income, not "after tax" income (disposable income), which is the income people actually have available to purchase goods and services. E. The population size of an economy impacts the distribution of data, causing large economies to show more inequality than smaller economies. F. do-it-yourself production of goods and services (such as growing own food or making own clothing) that are not bought or sold in the market G. in-kind transfers where goods and services are given as aid to the poor instead of casharrow_forwardSuppose the income share of the population by quintile is the following: Income Share (percent) Quintile 1 4.5 Quintile 2 14.7 Quintile 3 19.8 Quintile 4 24.0 Quintile 5 37.0 What is the Gini coefficient? Round your answer to the nearest second decimal.arrow_forwardThe following income distribution data are for Brazil. Quintile Percent Share Lowest 20% 3.0% Second quintile 6.9% Third quintile 11.8% Fourth quintile 19.6% Highest 20% 58.7% Highest 10% 43.0% a. Carefully graph the Lorenz curve, labeling the axes. b. Brazil’s national income is about $300 billion. What is the approximate dollar income of the bottom 20%? Bottom 40%?arrow_forward
- I am not sure which other ones to check off as an answer.arrow_forwardThe following table shows the approximate income distribution for Peru, Bulgaria, and Lithuania in 2016. In particular, it shows the income shares of each fifth of the income distribution. Percentage Share, 2016 Percentage of Families Peru Bulgaria Lithuania Lowest fifth 4 9 7 Second-lowest fifth 8 14 12 Middle fifth 12 17 16 Second-highest fifth Highest fifth 20 22 22 56 38 43 has the most total income. On the following graph, plot the Lorenz curves for the three countries. Plot Peru's Lorenz curve using the green points (triangle symbol), Bulgaria's Lorenz curve using the blue points (circle symbol), and Lithuania's Lorenz curve using the purple points (diamond symbol). Be sure to plot the first point of each Lorenz curve at (0,0). Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. CUMULATIVE PERCENTAGE OF MONEY INCOME graph.) 20 100 20 40 60 80 100 CUMULATIVE PERCENTAGE OF FAMILIES Peru Bulgaria Lithuania…arrow_forwardPlease help solvearrow_forward
- 2arrow_forward= The $1.4 billion trick to make us accept income inequality Lotteries take money from the poor and redistribute it unequally. The poor, the uneducated, and minorities play the lottery the most, and it takes a big chunk of their income. Source: The Huffington Post, January 12, 2016 If the news clip is correct, how does a lottery change the distribution of income? Draw two Lorenz curves to illustrate your answer. CID Lotteries result in the distribution of income OA. becoming more unequal OB. becoming more equal OC. remaining unchanged Draw the Lorenz curve in a country that does not have lotteries. Label it Before. Draw the Lorenz curve for the country after the introduction of lotteries. Label it After. >>> To reposition the label click on the cross by the label box and drag it. Cumulative percentage of income 100- 80- 60- 0 20 40 60 80 100 Cumulative percentage of households >>> Draw only the objects specified in the question. 40- 20-arrow_forwardWhat is the Lorenz curve and what does it illustrate? Are incomes distributed equally? What would happen if incomes were equal? Why do you think income distribution is so unequal? Identify and explain three reasons.arrow_forward
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