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Chapter 15: Q. 47 (page 379)

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?

Short Answer

Expert verified

The income inequality is higher in US than for the 10 people as calculated.

Step by step solution

01

Step1. Introduction 

Quintiles is a method of calculation of income distribution under which economists divide a group of people into fifths.

02

Step2. Calculation

Here, a group of 10 people is given, hence there would be 2 people in each of the five quintile.

Aggregate of all incomes is $ 400000.

QuintilesIncomesTotal Quintile IncomePercentage of total income
First$15000
$20000		$350008.75%
Second$30000
$30000		$6000015%
Third$35000
$40000		$7500018.75%
Fourth$45000
$50000		$9500023.75%
Fifth$55000
$80000		$13500033.75%

The top quintile has smaller share of income and last quintile has larger share of income as compared to the US data of 2005. The income distribution although is fairly equal as compared to US.

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