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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Chapter 18, Problem 6.1P
To determine
Identify the role of poverty line in different residents.
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Use the following information to calculate poverty rates for the following two countries, Woolandia and Narnia.
Set the poverty line equal to $365.
Calculate the Headcount Index measure of poverty for each country.
What does this tell you (or not tell you) about poverty in the countries?
Use the following information to calculate poverty rates for the following two countries, Woolandia and Narnia. Set the poverty line to $365.
What is the Poverty Gap Index for each country?
What does this measure tell you that is different from the headcount index?
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 2010, the poverty income
threshold, or poverty line, is set at an annual income of $42,350 for an individual.
Year
2006
2010
2016
2020
Quintile
Lowest
Lowest Quintile Second Quintile
3.0
3.4
3.8
5.0
The data in the table suggest that there was
Second
Middle
Fourth
Highest
Share of Total Income in Perkopia
(Percent)
Middle Quintile Fourth Quintile Highest Quintile
8.6
9.4
9.7
11.0
Share of Income in 2010
(Percent)
3.4
9.4
14.6
22.4
50.2
14.0
14.6
15.2
15.5
Complete the following table to help you determine the poverty line in Perkopia in 2010. 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…
Chapter 18 Solutions
Principles of Economics (12th Edition)
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- Dina and Charles are married, under the age of 65, and have two children under the age of 18. Charles works full time and earns $19,000, while Dina works part time and earns $9,000. Thus, in total, their family income is $28,000. Are Charles and Dina living in poverty? O Yes O No Suppose that Charles divorces Dina and leaves the family without paying alimony or child support. Dina must now support her two children alone, so she begins working full time and earns a total of $18,000. Are Dina and her children living in poverty? O Yes O No Again, consider Dina, a single mother with two children under 18 who earns an annual income of $18,000. Suppose that Dina qualifies for a welfare program for single mothers that provides her with $4,000 in food assistance. After receiving welfare, is Dina's family living in poverty? O Yes O Noarrow_forwardPoverty and Income Distribution: End of Chapter Problems 4. Currently, the poverty threshold for a family of four is just over $25,000 a year. Among the given factors that affect poverty, indicate those that the official poverty threshold accounts for and those that it does not. Accounted for by the official poverty threshold Not accounted for by the official poverty threshold Answer Bank Differences in tax rates between different locales Inflation The cost of essential living expenses Changes in noncash benefits Geographical differences in the cost of livingarrow_forwardIn measuring poverty, what are factors excluded in the main definition of poverty that are included in the Supplemental Poverty Measure? What factors are not included in the Supplemental Poverty Measure that you think are important in understanding and measuring poverty?arrow_forward
- A sobering census report: Americans' meager income gains The Census Bureau reported that median household income rose 0.7 percent in 2006 to $48,210, but it was still about $1,000 less than in 2000, before the start of the last recession. Households living in poverty fell to 12.3 percent from 12.6 percent in 2005. But in 2006, 36.5 million Americans were living in poverty-5 million more than in 2000, when the poverty rate was 11.3 percent. Source: The New York Times, August 29, 2007 How did income inequality change during 2000, 2005, and 2006? *** During 2000, 2005, and 2006, OA. income inequality increased in all quintiles OB. income inequality decreased at the upper end of the income distribution OC. at the lower end of the income distribution, income inequality increased between 2000 and 2005 and then decreased slightly during 2006 OD. income inequality decreased in all quintiles Search Nextarrow_forwardThe 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 2006, the poverty line is set at an annual income of $42,350 for an individual. Year 2000 2006 2012 2018 Lowest Quintile 3.0 3.4 3.8 5.0 Share of Total Income in Perkopia (Percent) Middle Quintile Fourth Quintile Second Quintile 8.6 9.4 9.7 11.0 The data in the table suggest that there was 14.0 14.6 15.2 15.5 21.9 22.4 22.9 25.0 Highest Quintile 52.5 50.2 48.4 43.5 income inequality from 2000 to 2018.arrow_forwardI'm not sure how to answer the last two questions.arrow_forward
- Consider a population of 10 people with the following incomes 1,1,3,3,4,4,4,6,8,10 with a poverty line of 5. Suppose that the poverty line increases to 6. Calculate the change in normalized poverty gap. 6.6 0 0.06 00.3 0.36arrow_forwardThe 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 2010, the poverty income threshold, or poverty line, is set at an annual income of $42,350 for an individual. Year 2006 2010 2016 2020 Lowest Quintile Second Quintile 3.0 3.4 3.8 5.0 Share of Total Income in Perkopia (Percent) 8.6 9.4 9.7 11.0 The data in the table suggest that there was Middle Quintile Fourth Quintile no evidence of an increase in 14.0 14.6 15.2 15.5 21.9 22.4 22.9 25.0 Highest Quintile 52.5 50.2 48.4 43.5 income inequality from 2006 to 2020. no change in Complete the following table to help you dete a decrease in y line in Perkopia in 2010. To do this, begin by determining the total income of all individuals in each quintile, using the fact tha ome in the economy is $500,000,000. Next, determine the income of…arrow_forward1. 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 2004, the poverty line is set at an annual income of $25,300 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. Year 1998 2004 2010 2016 Lowest Quintile 3.2 3.4 3.8 4.0 Share of Total Income in Perkopia (Percent) Middle Quintile Fourth Quintile Second Quintile 8.0 9.0 9.5 10.0 The data in the table suggest that there was 14.0 14.6 15.4 16.5 21.8 22.0 22.7 24.0 Highest Quintile 53.0 51.0…arrow_forward
- 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 2016, the poverty income threshold, or poverty line, is set at an annual income of $43,275 for an individual. Year Share of Total Income in Perkopia (Percent) Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Highest Quintile 2006 3.0 7.6 14.0 21.7 53.7 2010 3.3 9.0 14.7 22.4 50.6 2016 3.9 9.5 15.0 22.7 48.9 2020 5.0 10.0 16.0 24.0 45.0 The data in the table suggest that there was income inequality from 2006 to 2020. Complete the following table to help you determine the poverty line in Perkopia in 2016. 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.…arrow_forwardComplete the following table to help you determine the poverty rate in Perkopia in 2019. 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 $28,000. Quintile Share of Income in 2019 Total Income Individual Income Below Poverty Line? (Percent) (Dollars) (Dollars) Lowest 4.0 Second 10.0 Middle 16.0 Fourth 23.0 Highest 47.0 Using the information in this table, the poverty rate in Perkopia in 2019 is . Suppose that the government introduces a welfare program in…arrow_forward1. 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 2019, the poverty line is set at an annual income of $40,850 for an individual. A Share of Total Income in Perkopia (Percent) Year Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Highest Quintile 2001 4.0 10.0 16.5 23.0 46.5 2007 3.8 9.7 15.0 22.5 49.0 2013 3.4 8.8 14.8 22.0 51.0 2019 3.0 8.2 14.0 21.8 53.0 The data in the table suggest that there was income inequality from 2001 to 2019.arrow_forward
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