Microeconomics For Today (MindTap Course List)
Microeconomics For Today (MindTap Course List)
9th Edition
ISBN: 9781305507111
Author: Irvin B. Tucker
Publisher: Cengage Learning
Question
Book Icon
Chapter P4, Problem 1KC
To determine

 The share of the total US income to the poorest 20 percent of all the US families.

Expert Solution & Answer
Check Mark

Answer to Problem 1KC

Option 'e' is correct.

Explanation of Solution

The economic growth is the increase in the inflation adjusted market value of goods and services in the economy over the time period. The distribution of income is the pattern in which the income is distributed within the population. Income inequality exists in an economy when a small percentage of population earns the largest share of national income, whereas the largest share of population earns the smallest share of national income.

Option (e):

The US economy is known as the capitalist economy and the country with the highest inequality. It is said that the poorest 20 percent of the population in the US earns only 5 percent of the national income of the US economy and that means option 'e' is correct.

Option (a):

The US economy depicts the highest level of income inequality where the highest share of income is earned by a smallest share of population and the highest share of population earns only a smallest share of national income. Thus, the excessive resources are not devoted to producing a product and hence, option 'a' is incorrect.

Option (b):

When 50 percent of income is earned by the poorest 20 percent of the population in the US economy, it indicates that there is a very low level of income inequality in the economy. Since the actual case is against it, option 'b' is incorrect.

Option (c):

When the poorest 25 percent of population has the share of 25 percent of the total income of the economy, it indicates that the level of income inequality is lower. However, the actual case in the US economy is such that the poorest 20 percent only earns the 5 percent of the US income and hence, option 'c' is incorrect.

Option (d):

The income distribution in the US economy is in such a way that only the 5 percent of the total US income is generated by the poorest 20 percent of the population. Thus, the given share of 10 percentage is higher than the actual share and thus, option 'd' is also incorrect.

Economics Concept Introduction

Income inequality:  Income inequality is the situation in the economy where a largest share of population earns only a smallest share of national income and vice versa.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Published in 1980, the book Free to Choose discusses how economists Milton Friedman and Rose Friedman proposed a one-sided view of the benefits of a voucher system. However, there are other economists who disagree about the potential effects of a voucher system.
The following diagram illustrates the demand and marginal revenue curves facing a monopoly in an industry with no economies or diseconomies of scale. In the short and long run, MC = ATC. a. Calculate the values of profit, consumer surplus, and deadweight loss, and illustrate these on the graph. b. Repeat the calculations in part a, but now assume the monopoly is able to practice perfect price discrimination.
The projects under the 'Build, Build, Build' program: how these projects improve connectivity and ease of doing business in the Philippines?
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
Micro Economics For Today
Economics
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Cengage,
Text book image
Economics For Today
Economics
ISBN:9781337613040
Author:Tucker
Publisher:Cengage Learning
Text book image
MACROECONOMICS FOR TODAY
Economics
ISBN:9781337613057
Author:Tucker
Publisher:CENGAGE L
Text book image
Survey Of Economics
Economics
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Cengage,
Text book image
ECON MACRO
Economics
ISBN:9781337000529
Author:William A. McEachern
Publisher:Cengage Learning
Text book image
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax