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Chapter 15: Q. 24 (page 378)

If a country had perfect income equality what

would the Lorenz curve look like?

Short Answer

Expert verified

If a country had perfect income equality the Lorenz curve would be line sloping up at 45degrees.

Step by step solution

01

Step 1. Definition 

It's a Graphical way of studying dispersion, Lorenz curve, was first used to measure the inequalities of income in society, the greater distance of the curve from the line of equality distribution more is the inequality in its series

02

Step 2. Graph 

The graph is as follows :

03

Step 3. Explanation

If a country has perfect income equality that means

total income distributiontotal income

but Lorenz curve measures inequalities of income, so the 45-degree line displays the perfect equality of income distribution

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Most popular questions from this chapter

Many critics of government programs to help low-

income individuals argue that these programs create a poverty trap. Explain how programs such as TANF, EITC, SNAP, and Medicaid will affect low-income and whether or not you think these programs will benefit families and children.

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?

Share of Income19791991
Top quintile39.70%42.90%
Fourth quintile24.80%22.70%
Middle quintile17.00%16.30%
Second quintile11.50%11.50%
Bottom quintile7.00%6.60%

A group of 10 people have the following annual incomes: \(55,000, \)30,000, \(15,000, \)20,000, \(35,000, \)80,000, \(40,000, \)45,000, \(30,000, \)50,000. Calculate the share of total income each quintile of this income distribution received. Do the top and bottom quintiles in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution for 2005?

Jonathon is a single father with one child. He can work as a server for \(6 per hour for up to 1,500 hours per year. He is eligible for welfare, and so if he does not earn any income, he will receive a total of \)10,000 per year. He can work and still receive government benefits, but for every \(1 of income, his welfare stipend is \)1 less. Create a table similar to Table 15.4 that shows Jonathan’s options. Use four columns, the first showing number of hours to work, the second showing his earnings from work, the third showing the government benefits he will receive, and the fourth column showing his total income (earnings + government support). Sketch a labor-leisure diagram of Jonathan’s opportunity set with and without government support.

A group of 10 people have the following annual incomes: \(24,000, \)18,000, \(50,000, \)100,000, \(12,000, \)36,000, \(80,000, \)10,000, \(24,000, \)16,000. Calculate the share of total income that each quintile receives from this income distribution. Do the top and bottom quintiles in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution?
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