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 8.1P
To determine
Identify the role of wealth distribution in different residents.
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How is wealth distribution in the united state of America? What percentage of the population have a given amount of wealth?
how to find the 90/10 income ratio?
Scientists studying the economics of a country, community, or group of people are often interested
in the distribution of wealth, where wealth is understood to mean the income or the personal assets
of individual households. A powerful tool for illustrating how wealth is distributed across a society
is the Lorenz curve (invented by the American economist Max Otto Lorenz in 1905).
A typical Lorenz curve is given by y = L(x), where 0 < x < 1 and 0 < y < 1. The variable
I represents the fraction of all households in the society and y = L(x) represents the fraction of
the total wealth that is owned by the fraction x of the society. For example, for the Lorenz curve
shown in Figure 1, we see that L(0.5) = 0.2, which means that 0.5 (50%) of the society owns 0.2
(20%) of the wealth.
bottom
botom
y A
1-
Line of perfect
equality
0.8 of households
control 0.6 of
the wealth.
Lorenz curve
0.5 of households
control 0.2 of
the wealth.
0.2
B
0.5
0.8 a1 1
Fraction of Households
Figure I
Fraction of…
Chapter 18 Solutions
Principles of Economics (12th Edition)
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Similar questions
- How do the greatest disparities of wealth exist in the United States?arrow_forwardWhat is your opinion on the idea that a persons income and wealth in American society today is ultimately determined by their own individual attitude and effort?arrow_forwardAccording to Andrew Carnegie, in his essay "Wealth", where does inequality of wealth come from, is it a problem or not, and how should it be solved?arrow_forward
- What is the solution to the income disparity between affluent and poor?arrow_forwardDescribe how to calculate a Gini coefficient.arrow_forwardA group of 10 people have the following annual incomes: $24, 000, $18, 000, $50, 000, $100, 000, $12, 000, $36, 000, $80, 000, $10, 000, $24, 000, $16, 000. Calculate the share of total income that each quintile receives from this income distribution. What percent of the total income is represented by the highest quintile? Round your answer to the nearest tenth. Provide your answer below:arrow_forward
- What is the difference between income and wealth? Which would you expect to have a more unequal distribution, and why? How might wealth impact income, and the distribution of income?arrow_forwardI need help soon as possiblearrow_forwardIncome inequalities exist in the U.S. What are some policy tools the government could use to try and equalize incomes between wealthier households and poorer households? Describe two policies. Have these policies been successful in the past? Why or why not ?arrow_forward
- Summarize the five most commonly used demographic variables.arrow_forwardIn a society with 240,000 households, 10,000 households earn $4 each, 4,000 households earn $2 each, 10,000 households earn $10 each, and the rest earn $1 each.What is the income share of the third quintile? (Not the cumulative income share, just the share of that quintile.) Please write down the answer with two decimal points in percentage form without the % sign. XX.xx, NOT XX.xx%arrow_forwardhttps://data.oecd.org/inequality/income-inequality.htmarrow_forward
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