EBK MICROECONOMICS
13th Edition
ISBN: 8220106798652
Author: Arnold
Publisher: CENGAGE L
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Question
Chapter 15, Problem 1WNG
To determine
Draw a Lorenz curve.
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The table shows after-tax income shares in Canada in 1986 and 2015.
After-tax income After-tax income
1986
2015
(percent of total)
Households
Lowest 20 percent
Second 20 percent
Middle 20 percent
Fourth 20 percent
Highest 20 percent
5
11
18
25
41
7
13
18
23
39
Draw a point to show the income earned by the lowest 20 percent of households in 1986.
Draw a point to show the income earned by the lowest 60 percent of households in 1986.
Draw a Lorenz curve that is consistent with the two points you've plotted.
Canadian after-tax income is distributed
equally in 2015 than in 1986.
100-
90-
80-
70-
60+
50-
40-
30+
20-
10-
04
Cumulative percentage of income
10 20 30 40 50 60 70 80 90 100
Cumulative percentage of households
>>> Draw only the objects specified in the question.
Below is a Lorenz Curve for a given country. Suppose its government cuts spending on Medicaid, Supplemental Nutrition Assistance Program and other aids to the poor. Show how the spending cuts would affect income inequality by drawing the new Lorenz Curve.
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
G
Knowledge Booster
Similar questions
- What is the difference between poverty and income inequality?arrow_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= 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-arrow_forward
- I need help with the first three sections please.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_forwardConsider five individuals, of whom three have zero income and two have $10,000 each. Based on Gini's original formula (G'), income inequality in this group is [gini). Enter a number to two decimal places and add the zero, as in 0.25 Consider five individuals, of whom three have zero income and two have $10,000 each. Draw the Lorenz curve. Note that the area under the line of perfect equality is 0.5. The area below the Lorenz curve is . The area between the Lorenz curve and the line of perfect equality is . The Gini coefficient (area method) is In all cases enter numbers to one decimal place and add the zero, as in 0.5arrow_forward
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