Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506893
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 15, Problem 11CQ
To determine
Fairness of income distribution.
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How do factor endowments affect personal income? Examine different provisions employed by the government in dealing with inequality in the distribution of income.
Use the information above to help answer these last two questions
Would this transfer increase, decrease, or have no effect on income inequality in this group?
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?)
Using the diagram above, which of the following is true?
a. In country S the poorest 30 percent of the population receive 13 percent of the available income in country S.
b. In country T the richest 10 percent of the population receive 23 percent of the available income in country T.
c. In country S the richest 10 percent of the population receive 55 percent of the available income in country S.
d. Country S has a more equal distribution of income than does country T.
e. None of the above is true.
Chapter 15 Solutions
Microeconomics: Private and Public Choice (MindTap Course List)
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True or false: An increase in the share of income earned by the top half of the income distribution implies that the bottom half’s share and per capita income both decreased. (Be sure to address both “share” and “per capita income.”).
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Suppose Inequality decreases without growth of mean incomes. What may likely happen to poverty? Suppose growth of mean income occurs without a change in inequality. What may likely happen to poverty? Explain
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