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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

it would be line sloping up at 45 degrees.

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 

03

Step 3. Explanation

if a country has perfect income equality that means

total income distribution= total 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

Suppose there are two possible income distributions in a society of ten people. In the first distribution, nine people would have incomes of \(30,000 and one person would have an income of \)10,000. In the second distribution, all ten people would have incomes of $25,000.

a. If the society had the first income distribution, what would be the utilitarian argument for redistributing income?

b. Which income distribution would Rawls consider more equitable? Explain.

c. Which income distribution would Nozick consider more equitable? Explain.

Imagine that the government reworks the welfare policy that was affecting Jonathan in question 1, so that for each dollar someone like Jonathan earns at work, his government benefits diminish by only 30 cents. Reconstruct the table

from question 1 to account for this change in policy. Draw Jonathan’s labor-leisure opportunity sets, both for before

this welfare program is enacted and after it is enacted.

Briefly explain the differences between TANF, the earned income tax credit, SNAP, and Medicaid.

Consider two of the income security programs in the United States: Temporary Assistance for Needy Families (TANF) and the Earned Income Tax Credit (EITC).

a. When a woman with Children and very low income earns an extra dollar, she receives less in TANF benefits. What do you think is the effect of this feature of TANF on the labor-supply of low-income women? Explain.

b. The EITC proves greater benefits as low-income workers earn more income (up to a point). What do you think is the effect of this program on the labor-supply of low-income individuals? Explain.

c. What are the disadvantages of eliminating TANF and allocating the savings to EITC?

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