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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Table 15.9 shows the share of income going to each quintile of the income distribution for the United Kingdom in 1979 and 1991. Use this data to calculate what the points on a Lorenz curve would be, and sketch the Lorenz curve. How did inequality in the United Kingdom shift over this time period? How can you see the patterns in the quintiles in the Lorenz curves?

Chapter 15, Problem 7SCQ, Table 15.9 shows the share of income going to each quintile of the income distribution for the

To determine

Lorenz curve for the share of income for each income distribution and the shift in inequality.

Explanation

The Lorenz curve represents cumulative share of population on its horizontal axis and cumulative percentage of the total income earned on its vertical axis.

According to the data given in the below table, we can see that income inequality increased fairly over time. We can measure the distribution of income among 5 groups compared to the total. The first quantile is the lowest fifth or 20%, the second quantile is the next lowest, and so on.

The table shows that the top quantile is getting a lot more, and the lowest quantile is getting a bit less.

Share of Income 1979 1991
Top quantile 39.7% 42.9%
Fourth quantile 24.8% 22.7%
Middle quantile 17.0% 16.3%
Second quantile 11.5% 11.5%
Bottom quantile 7...

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