ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Please complete the table and answer questions 1-5

A group of 10 people have the following annual incomes: $55,000, $30,000, $15,000, $20,000, $35,000, $80,000, $40,000, $45,000, $30,000, $50,000. Complete the table.

 

Income

Quintile

Share of Income

$15,000

Bottom

 

$20,000

$30,000

2nd

 

$30,000

$35,000

3rd

 

$40,000

$45,000

4th

 

$50,000

$55,000

Top

 

$80,000

 

  1. If $4000 is taxed from the top earner and transferred to the lowest earner, would that increase or decrease the share of income held by the top quintile?
  2. Would this transfer increase or decrease the share of income held by the bottom quintile?
  3. Would this have any effect on the 2nd quintile? The 3rd? The 4th?
  4. Would this transfer increase, decrease, or have no effect on income inequality in this group?
  5. Redistributing income from the highest earner to the lowest one would reduce the utility of the top earner and increase the utility of the lowest earner. But what would happen to overall utility in the economy? Would it increase, decrease, or remain the same? Explain your answer. (Hint: does the marginal utility of income diminish as one earns more?)
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Follow-up Question

Please answer based on information above. 

  1. Would this transfer increase, decrease, or have no effect on income inequality in this group?
  2. Redistributing income from the highest earner to the lowest one would reduce the utility of the top earner and increase the utility of the lowest earner. But what would happen to overall utility in the economy? Would it increase, decrease, or remain the same? Explain your answer. (Hint: does the marginal utility of income diminish as one earns more?)
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Follow-up Question

Use the information above to help answer these last two questions

  1. Would this transfer increase, decrease, or have no effect on income inequality in this group?
  2. Redistributing income from the highest earner to the lowest one would reduce the utility of the top earner and increase the utility of the lowest earner. But what would happen to overall utility in the economy? Would it increase, decrease, or remain the same? Explain your answer. (Hint: does the marginal utility of income diminish as one earns more?)
Solution
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by Bartleby Expert
SEE SOLUTION
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question

Please answer based on information above. 

  1. Would this transfer increase, decrease, or have no effect on income inequality in this group?
  2. Redistributing income from the highest earner to the lowest one would reduce the utility of the top earner and increase the utility of the lowest earner. But what would happen to overall utility in the economy? Would it increase, decrease, or remain the same? Explain your answer. (Hint: does the marginal utility of income diminish as one earns more?)
Solution
Bartleby Expert
by Bartleby Expert
SEE SOLUTION
Follow-up Question

Use the information above to help answer these last two questions

  1. Would this transfer increase, decrease, or have no effect on income inequality in this group?
  2. Redistributing income from the highest earner to the lowest one would reduce the utility of the top earner and increase the utility of the lowest earner. But what would happen to overall utility in the economy? Would it increase, decrease, or remain the same? Explain your answer. (Hint: does the marginal utility of income diminish as one earns more?)
Solution
Bartleby Expert
by Bartleby Expert
SEE SOLUTION
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