Look at the following ratios: • 90/10 ratio the ratio of Decile 10 income to Decile 1 income • 90/50 ratio the ratio of Decile 10 income to Decile 5 income (the median) • 50/10 ratio = the ratio of Decile 5 income (the median) to Decile 1 income. (a) For each of these ratios, explain why policymakers might want to compare the two deciles in the income distribution. (b) What kinds of policies or events could affect these ratios?
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- In 2010 the government’s main medical adviser drew up plans for a minimum price foralcohol intended to double the cost of some drinks.Under the proposal no drinks could be sold for less than 50 pence per unit of alcohol theycontain. This would mean most bottles of wine could not be sold for under £4.50. Theproposal is aimed at reducing alcohol abuse. A spokesman for an opposition party saidthat it was more important to deal with peoples’ attitudes and not just the price of alcohol.The Portman Group, set up by drinks manufacturers to promote sensible drinking, arguesthat it would damage the majority of drinkers who behave responsibly in terms of theirconsumption.The NHS bill for alcohol abuse is an estimated £2.7bn a year. Recent figures showhospital admissions linked to alcohol use have more than doubled in England since 1995.Alcohol was the main or secondary cause of 207,800 NHS admissions in 2006/7,compared to 93,500 in 1995/96. The number of alcohol-related deaths in England…The data in the table below shows the income of some random people in Massachusetts. If these were the only people in Massachusetts what is the average (absolute) difference in income among all the pairs? nаme Pre-tax income Mayor Wu $20 Tom Brady $120 Matt Damon $60How can profit motive lead to income inequality? (Pages 33 – 35) pages 33 Investment is necessary but risky. It has already been establishedthat capitalism is the most effective and efficient system for wealthcreation and economic prosperity. The path to economic successconsists in investment that is guided by supportive governmentpolicies and institutions. The success of capitalism, in turn, isderived from the success of business enterprises in their roles asjob creators and income-generating agents. However, investmentrequires enormous risk and sacrifice, along with one’s willingnessto undertake such risky ventures, which are based on the potentialreturns on the investment capital. A successful investor must notonly possess organizational and managerial skills, but he or shemust also be willing to take enormous risks. Tanner (2016) madethe point that one of the prerequisites for economic growth isto have individuals who are ambitious, skilled risk-takers andwho are ever striving for…
- SC Many economists believe that a more effective way to supplement the income of the poor is through a negative income tax. Under this scheme, everyone reports his or her income to the government; individuals and families earning a higher income will pay a tax based on that income, while low-income individuals and families receive a subsidy, or negative tax. Assume that the only qualification required to receive a tax credit is low income. Suppose the government uses the following equation to compute a family's tax liability: Taxes Owed = (1/4 of Income) For each of the incomes listed in the following table, determine the tax liability for a family with that income level. (Note: If a family receives a subsidy because its income is too low, be sure to indicate the tax liability as negative.) Income Tax Liability (Dollars per year) (Dollars per year) 0 20,000 40,000 60,000 77°F Mostly sunny (1/4 of Income) - $10,000 F1 F2 0- F3 Q+ F4 F5 DA COL F6 i F7 1 C J F8 C F9 SAC F10 FO F11 F12 2…In season three of the TV show “The West Wing,”the federal government considers redefining thenational poverty measure in a way that wouldclassify an additional 4 million people as poor.The president worries that his administration willbe criticized for leading the country into greaterpoverty. Explain whether this change would havereflected a shift in an absolute measure of poverty,a relative measure of poverty, or whether it cannot be known. Finally, explain why all else equal,the president is not responsible for causing greaterpovertySuppose you are a typical person in the U.S. economy.You pay 4 percent of your income in a state incometax and 15.3 percent of your labor earnings in federalpayroll taxes (employer and employee sharescombined). You also pay federal income taxes as inTable 2 (p. 228). How much tax of each type do youpay if you earn $30,000 a year? Taking all taxes intoaccount, what are your average and marginal tax rates?What happens to your tax bill and to your average andmarginal tax rates if your income rises to $60,000?
- A5 South Africa's top 10% of earners contribute almost half of all revenue, and the richest 10% of its residents holds 85.6% of net wealth, according to the OECD, which sees scope for the tax system to be used more to reduce inequality. Based on the above paragraph, which of the following statements is INCORREC A. South African 's bottom 90%of income earners contribute allof to the revenu B. South Africa's income inequality levels are very hig C. South Africa' s income inequality levels are very lo D. South Africa's income contribution is equalwheTWhen recording devices were first invented morethan 100 years ago, musicians could suddenly supplytheir music to large audiences at low cost. How doyou suppose this development affected the income ofthe best musicians? How do you suppose it affectedthe income of average musicians?In the United States, one of the largest welfare programs is the Supplemental NutritionAssistance Program (SNAP) representing the second largest in-kind transfer programfor individuals in the US. From the abstract of the study we are told “[a] 1% increasein benefits per population raises grocery prices by a persistent 0.08%. A calibratedpartial-equilibrium model implies a marginal benefit dollar raises a recipient’s consumersurplus from groceries by $0.7, producer surplus by $0.5, and lowers each non-SNAPconsumer’s surplus by $0.05.” In other words, increasing the size of the in-kind transferleads to higher prices. This higher price results in a larger surplus for grocery stores anda lower consumer surplus for individuals not participating in SNAP. Those individualswho participate in SNAP can increase their overall consumer surplus as they haveaccess to more goods, despite the higher price. This result is estimated using thenearly 100% redemption of the SNAP benefits (i.e. assuming the…
- Consider the following table with individuals in a country and their incomes: Individuals Income 1 15 30 4 45 55 6 70 7 85 8. 100 115 10 130 Total 650 O The ratio of income received by the top decile to the bottom quintile is 3.5. O The ratio of income received by the top decile to the bottom quintile is 7.3. O The ratio of income received by the top decile to the bottom quintile is 4.3. O The ratio of income received by the top decile to the bottom quintile is 6.5.In 2010 the government’s main medical adviser drew up plans for a minimum price for alcohol intended to double the cost of some drinks.Under the proposal no drinks could be sold for less than 50 pence per unit of alcohol theycontain. This would mean most bottles of wine could not be sold for under £4.50. Theproposal is aimed at reducing alcohol abuse. A spokesman for an opposition party saidthat it was more important to deal with peoples’ attitudes and not just the price of alcohol.The Portman Group, set up by drinks manufacturers to promote sensible drinking, arguesthat it would damage the majority of drinkers who behave responsibly in terms of theirconsumption.The NHS bill for alcohol abuse is an estimated £2.7bn a year. Recent figures showhospital admissions linked to alcohol use have more than doubled in England since 1995.Alcohol was the main or secondary cause of 207,800 NHS admissions in 2006/7,compared to 93,500 in 1995/96. The number of alcohol-related deaths in England…Table: Income Distribution in Four Countries provides recent data from the World Bank on the distribution of income in four countries. Percent income top quintile Percent income middle three quintiles combined O Bangladesh. Costa Rica. Table: Income Distribution in Four Countries Bangladesh El Salvador 41.4% 46.4% O Mexico. 50.0% 47.7% 8.6% Percent income bottom quintile Based on the data, the country with the distribution of income that is closest to equal is: El Salvador. Mexico 50.1% 5.9% 44.2% Costa Rica 54.0% 5.7% 41.8% 4.2%