Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Question
Chapter 12, Problem 4SQ
To determine
The line of perfect equality.
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If an economy has perfect equality (everyone earns the same income), the Lorenz curve for that economy will be
Question 21 options:
A horizontal line.
A vertical line.
A diagonal line.
A curved line.
8. Four students have yearly incomes of $5,000, $15,000, $20,000,
and $60,000.
a. Make a table of the Lorenz Curve and use the Trapezoidal Rule
with 4 trapezoids to find the area under the Lorenz Curve. Your
answer should be correct to 2 places after the decimal point.
The area under the Lorenz Curve is
b. Use the results of Part a to find the Gini Index. Your answer
should be correct to 2 places after the decimal point.
The Gini Index is
There are two economies. Economy A has 10
people: there are four people that make 10
dollars a day, and two that make each 20, 60
and 100 dollars a day. Economy B has 10
people: four that make 1 a day and two each
that make 3, 5 and 10 dollars a day.
A. For each economy draw a Lorenz Curve.
B. For each economy calculate the 90/10
ratio.
C. For each economy calculate the Gini
Coefficent.
D. Which economy is more unequal?
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
- If a country had perfect income equality what would the Lorenz curve look like?arrow_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_forwardWhich 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.arrow_forward
- On the Lorenz curve, a household earning the median income is in the _______________ quintile. Question 22 options: First Second Third Fourtharrow_forwardThe Lorenz curve is used to show which of the following? a. The total income generated from all activities b. The degree of inequality in the distribution of income within a country c. The progressivity of the income-tax structure within a country d. The extent of wage differences among workers in similar occupations e. The change in the poverty rate within a country over timearrow_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
- 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 this Lorenz Curve, is the distribution of income fair? Why or why not?arrow_forward4. a. Draw, on the same graph, a Lorenz curve representing Perfect income equality Perfect income inequality i. ii. ii. A typical rich country with a lot of redistribution A typical middle-income country with little redistribution b. Consider a country that makes its social support programs (like “food stamps", insurance, or programs that provide goods like housing or health care to the poor) more generous, while taxing the rich more in order to fund the programs. How will that economy's Lorenz curve change? c. Suppose a country becomes richer, such that over 10 years, every person's income exactly doubles. What happens to that economy's Lorenz curve? iv. unemploymentarrow_forwardAs the Lorenz Curve gets closer to the line of absolute equality, the ________. a. the higher is the degree of income equality b. the lower is the degree of income inequality c. the lower is the degree of income equality d. the higher is the degree of income inequalityarrow_forward
- What is the Lorenz curve and what does it illustrate? Are incomes distributed equally? What would happen if incomes were equal? Why do you think income distribution is so unequal? Identify and explain three reasons.arrow_forwardThe farther the Lorenz curve from the line of perfect equality, the lower is the income inequality. True or false?arrow_forward3. 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.arrow_forward
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