Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 20, Problem 3IAPA
To determine
Distribution of income which is more unequal.
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A 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:
The following represents the income for the five citizens of Sodor: Thomas $14,000
James $20,000 Gordon $50,000 Percy $6,000 Clara $10,000 a) Make a table that shows
the income, cumulative income, and cumulative income percentages for each of the
quintiles. (Start with the lowest, meaning Percy) b) Draw a Lorenz curve and the line of
absolute equality for the above situation. c) The tax rates for the island are as follows: no
tax on the first $10,000, 10% tax rate on the next $10,000, and 50% tax rate on anything
above $20,000. d) What is the total tax collected by the government? If each citizen
receives 1/5 of the tax collected, how much would each receive? e) Make a table that
shows the new income for the citizens, cumulative income, and the cumulative income
percentage (income-tax payment + distribution payment) for each quintile. f) Add the
new Lorenz curve to the graph in b). g) How have the Lorenz curve and Gini coefficient
been affected by the tax? Explain.
3. There are three agents, a, b, and c. Person a receives $500 in income, b receives $400, and c gets $100. How much income of the total income does the poorest 1/3 receive? How much does the bottom 2/3 receive? Graph the Lorenz Curve. Calculate area B. Calculate area A. What is the gini coefficient? Use a graph like the one below to draw a picture of the Lorenz curve and help in calculating areas A and B.
Chapter 20 Solutions
Foundations of Economics (8th Edition)
Ch. 20 - Prob. 1SPPACh. 20 - Prob. 2SPPACh. 20 - Prob. 3SPPACh. 20 - Prob. 4SPPACh. 20 - Prob. 5SPPACh. 20 - Prob. 6SPPACh. 20 - Prob. 7SPPACh. 20 - Prob. 8SPPACh. 20 - Prob. 9SPPACh. 20 - Prob. 1IAPA
Ch. 20 - Prob. 2IAPACh. 20 - Prob. 3IAPACh. 20 - Prob. 4IAPACh. 20 - Prob. 5IAPACh. 20 - Prob. 6IAPACh. 20 - Prob. 7IAPACh. 20 - Prob. 8IAPACh. 20 - Prob. 9IAPACh. 20 - Prob. 10IAPACh. 20 - Prob. 11IAPACh. 20 - Prob. 1MCQCh. 20 - Prob. 2MCQCh. 20 - Prob. 3MCQCh. 20 - Prob. 4MCQCh. 20 - Prob. 5MCQCh. 20 - Prob. 6MCQCh. 20 - Prob. 7MCQ
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- The table shows after-tax income shares in Canada in 1986 and 2015. After-tax income After-tax income 1986 2015 (percent of total) Households Lowest 20 percent Second 20 percent Middle 20 percent Fourth 20 percent Highest 20 percent 5 11 18 25 41 7 13 18 23 39 Draw a point to show the income earned by the lowest 20 percent of households in 1986. Draw a point to show the income earned by the lowest 60 percent of households in 1986. Draw a Lorenz curve that is consistent with the two points you've plotted. Canadian after-tax income is distributed equally in 2015 than in 1986. 100- 90- 80- 70- 60+ 50- 40- 30+ 20- 10- 04 Cumulative percentage of income 10 20 30 40 50 60 70 80 90 100 Cumulative percentage of households >>> Draw only the objects specified in the question.arrow_forward5- Calculate Gini coefficient for a country with the following deciles in income share data: Country X: 30 (richest quantile) 20 What is the area under the Lorenz Curve? Please show your diagram. 10 5 5 5 5 3 2arrow_forwardStep on how to solve on Excel. In a certain country, the population consists of five blue people and five green people. Each green person has an income of $2 per year. Each blue person has an income of $6 per year.a. Draw the Lorenz Curve for this country.b. On your diagram from Part a, indicate clearly what area you would divide by what other area to calculate the Gini Coefficient.c. Calculate the Gini Coefficient. Show your work.arrow_forward
- Question 11 The following income distribution data are for Lesotho: Quintile Lowest 10% Lowest 20% Second quintile Third quintile Fourth quintile Highest 20% Percent Share 2.2% 3.0% 7.2% 12.5% 21.0% 56.3% Carefully graph the Lorenz curve, labeling the axes. You should be able to draw a graph on your computer, save it as a graph, picture, or document, and upload that graph, picture, or document to your answer box. If you cannot do that, you can always draw a graph on paper, take a picture, and upload the picture to your answer box.arrow_forwardActual Distribution of Wealth in the US Source: Adapted from the video "Wealth Inequality in America," 2012. Note: This document uses 2009 data. As of 2017, this inequality had only become greater. In this graph, the population of 300-plus million Americans is reduced to a representative group of 100 people. So, each person in this image represents 1% of the population. This group of 100 people has been lined up according to their wealth, poorest people on the left, wealthiest on the right. These 100 people have been shaded based on which 20% quintile they fall into. Then, the total wealth of the United States, which was roughly $54 trillion in 2009, was distributed among our 100 Americans. The poorest Americans don't even register, they are down to pocket change, and the middle class is barely distinguishable from the poor. 1% of America has 40% of all the nation's wealth, the bottom 80% only has 12% between them. The top 1% own half the country's, stocks, bonds and mutual funds. The…arrow_forward1arrow_forward
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