Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Chapter 12, Problem 17SQ
To determine
The implication of the Lorenz curve on the diagonal.
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Students have asked these similar questions
Which of these is true about the Lorenz curve?
a. allows us to rank all countries by the degree of poverty.
b. allows us to rank all countries by the degree of inequality.
c. is an incomplete measure of inequality.
d. is a measure of the wealth of a country.
=
The $1.4 billion trick to make us accept income inequality
Lotteries take money from the poor and redistribute it unequally. The poor, the uneducated, and minorities play the lottery
the most, and it takes a big chunk of their income.
Source: The Huffington Post, January 12, 2016
If the news clip is correct, how does a lottery change the distribution of income? Draw two Lorenz curves to illustrate your
answer.
CID
Lotteries result in the distribution of income
OA. becoming more unequal
OB. becoming more equal
OC. remaining unchanged
Draw the Lorenz curve in a country that does not have lotteries. Label it Before.
Draw the Lorenz curve for the country after the introduction of lotteries. Label it After.
>>> To reposition the label click on the cross by the label box and drag it.
Cumulative percentage of income
100-
80-
60-
0
20
40
60
80
100
Cumulative percentage of households
>>> Draw only the objects specified in the question.
40-
20-
An economy has 5 households with annual income (alphabetical order): A - $40,000, B -
30,000, C - 60,000, D - 70,000, E - $50,000.
1. Fill in the following table by ranking households income from low to high. 1st 20% being lowest
and 5th 20% the highest.
2. Complete the calculation of cumulative income.
3. To complete the Lorenz curve, we need the share of cumulative income in total income. The
cumulative income of low 60% of households has how much share (percentage) in total income?
4. The top 20% household in this economy enjoys how much percentage of total income?
Houscholds
Income
Cumulative
Rank
Income
1st 20%
2nd 20%
3nd 20%
4th 20%
sth
20%
Chapter 12 Solutions
Micro Economics For Today
Ch. 12.2 - Prob. 1YTECh. 12.2 - Prob. 2YTECh. 12.5 - Prob. 1.1YTECh. 12.5 - Prob. 2.1YTECh. 12 - Prob. 1SQPCh. 12 - Suppose each family in the United States earned an...Ch. 12 - Prob. 3SQPCh. 12 - Prob. 4SQPCh. 12 - Prob. 5SQPCh. 12 - Prob. 6SQP
Ch. 12 - Prob. 7SQPCh. 12 - Prob. 8SQPCh. 12 - Prob. 9SQPCh. 12 - Prob. 10SQPCh. 12 - Prob. 11SQPCh. 12 - Prob. 1SQCh. 12 - Prob. 2SQCh. 12 - Prob. 3SQCh. 12 - Prob. 4SQCh. 12 - Prob. 5SQCh. 12 - Prob. 6SQCh. 12 - Prob. 7SQCh. 12 - Prob. 8SQCh. 12 - Prob. 9SQCh. 12 - Prob. 10SQCh. 12 - Prob. 11SQCh. 12 - Prob. 12SQCh. 12 - Prob. 13SQCh. 12 - Prob. 14SQCh. 12 - Prob. 15SQCh. 12 - Prob. 16SQCh. 12 - Prob. 17SQCh. 12 - Prob. 18SQCh. 12 - Prob. 19SQCh. 12 - Prob. 20SQ
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Similar questions
- 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. Calculate the share of total income each quintile of this income distribution received. Do the top and bottom quintile s in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution for 2005?arrow_forwardWhat do you think is more important to focus on when considering inequality: income inequality or wealth inequality?arrow_forwardIn order to measure income inequality, economists look at how income is distributed in ... Group of answer choices a. quintiles b. degrees c. five percent brackets d. ten percent bracketsarrow_forward
- 1. If an economy has perfect income equality, explicitly describe what that economy's Lorenz Curve would look like. 2. Briefly describe a situation where you believe two workers should have perfect income equality. Briefly describe a situation where you believe it's okay for two workers to experience income inequality.arrow_forward1. An economy's Lorenz Curve reveals that an economy's highest income quintile has 65% of the economy's income while the lowest income quintile only has 5% of the economy's income. Solely based on the Lorenz Curve, is this distribution of income fair? Why or why not? 2. To combat income inequality and to generate increased tax revenues to fund expenditures, government officials decide to aggressively increase how progressive income taxes are, so much so that the top income earners are marginally taxed 90% of their income (and while this marginal tax rate may seem oppressive, these top income earners still have more than enough income to satisfy all of their needs and all but the most extravagant of wants - basically, these earners have more than enough money). Argue why this tax policy is a fair approach to fund government expenditures. Why might this tax policy fail to achieve its objectives (tax revenues would actually decline as a result)?arrow_forwardEconomists experience difficulties in accurately measuring income inequality because of which of the following? Choose one or more: A. The Gini index calculation discriminates against the poor in developed economies. B. Government programs are inefficient and difficult to monitor. C. large, underground economies that lack the reporting of income to the government D. Measurements tend to use "before tax" income, not "after tax" income (disposable income), which is the income people actually have available to purchase goods and services. E. The population size of an economy impacts the distribution of data, causing large economies to show more inequality than smaller economies. F. do-it-yourself production of goods and services (such as growing own food or making own clothing) that are not bought or sold in the market G. in-kind transfers where goods and services are given as aid to the poor instead of casharrow_forward
- The $1.4 billion trick to make us accept income inequality Lotteries take money from the poor and redistribute it unequally. The poor, the uneducated, and minorities play the lottery the most, and it takes a big chunk of their income Source: The Huffington Post, January 12, 2016 If the news clip is correct, how does a lottery change the distribution of income? Draw two Lorenz curves to illustrate your answer. Lotteries result in the distribution of income Draw the Lorenz curve in a country that does not have lotteries. Label it Before Draw the Lorenz curve for the country after the introduction of lotteries. Label it After >>> To reposition the label click on the cross by the label box and dragging it 100 80 60 40- 20 Cumulative percentage of income 100 20 40 60 00 Cumulative percentage of households >>>Draw only the objects specified in the question Garrow_forwardThe $1.4 billion trick to make us accept income inequality Lotteries take money from the poor and redistribute it unequally. The poor, the uneducated, and minorities play the lottery the most, and it takes a big chunk of their income Source: The Huffington Post, January 12, 2016 If the news clip is correct, how does a lottery change the distribution of income? Draw two Lorenz curves to ilustrate your answer. Lotteries result in the distribution of income Draw the Lorenz curve in a country that does not have lotteries. Label it Before Draw the Lorenz curve for the country after the introduction of lotteries. Label it After >> To reposition the label click on the cross by the label box and dragging it 100 80 60 40- 20 Cumulative percentage of income 100 20 40 60 00 Cumulative percentage of households >>> Draw only the objects specified in the question Garrow_forwardA Lorenz curve is a graph whose axes measure the: a. total amount of income in dollars on one axis and the total number of individuals or families receiving that income or a lower one on the other. b. percentage of people (10 percent, 20 percent, etc.) on one axis and the percentage of total income received by the lowest 10 percent, the lowest 20 percent, etc., on the other. c. number of individuals or families receiving a certain income on one axis and the percentage of the total population represented by that number on the other. d. number of individuals or families in different occupations on one axis and the median income received in that occupation on the other. e. income classes (e.g., $0 to $1999 and $2000 to $3999) on one axis and the percentage of individuals or families in each such income class on the other.arrow_forward
- Imagine someone living close to the poverty line in a developing country. This person runs a small business filtering and selling water. Her daughter gets sick, and she has to sell her filtering machine to pay for treatment. Now she makes very little money cleaning fish for a local fishing cooperative. Graph her income today versus her income tomorrow before her daughter got sick. Explain your assumptions with labels on the graph. Then graph what happens to the equilibrium after her daughter gets sick. Hint: this is an example of a trap.arrow_forwardThe Lorenz curve represents the relationship between a. the cumulative percentage of households and the cumulative percentage of income b. income tax rates and income tax revenues c. child labor rates and the poverty levels d. income inequality and education level e. market structure and the number of firms in the marketarrow_forwardWhen the Lorenz curve lies above thediagonal,a. the poorest 20 percent of the populationreceive more than 20 percent of income.b. the richest 20 percent of the populationreceive more than 20 percent ofincome.c. everyone receives the same income.d. the curve is wrong because it is impossible forthe graph to look like this.arrow_forward
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