6 Income inequality and the poverty rate The fullowing table summarizes the inco

Question

6 Income inequality and the poverty rate The fullowing table summarizes the income distribution for the town of Perkopia, which has a population of 10,000 people. Every indvidual within an ncome group threshold, or poverty line, is set at an annual income of $43,275 for an individual, earns the same income, and the total annual income in the economy is s500,000,000, Suppose that in 2006, the poverty income Share of Total Income in Perkopia (Percent) Middle Quintile 14.0 14.9 Year Lowest Quintile 1994 Second Quintile 8.0 9.0 9.6 10.0 Fourth Quintile 21.8 22.4 Highest Quintile 3.2 3.5 3.8 53.0 48.9 2012 16.5 45.5 The data in the table suggest brat there was income inequality from 1994 to 2012. Complete the following table to help you determine the poverty rate Park in 2006. To do thes, begin by determining the tl me of ndividuals in each quintile, using the fact that total annuat income in the economy a so0,000,000 Next, determine the income of an ntl each quintile by dividing the total income of that quintle by the number of peadle A chat qurete (Mint. Rcal sht Perkopia hasa pepulaon of 10,000 pecple.) Finally, determine whether the individlual income for each guntve Satr selow the overty noome thresheld, or peverty ne of Tetal Income rDollars) (Percent) cooarsyBelow Poverty Line?

Explanation / Answer

The data in the table suggest that there was decrease income inequality from 1994 to 2012.

The proverty rate of Perkopia in 2006 is 60%

Transfer payment $7000 does not effect on the Poverty rate so In the year 2006 the proverty rate after the introduce of welfare programme in Perkopia is 60%

First & second statement is correct.

Quintile share of income in 2006(%) Total Income(in Dollars) Individual Income(in Dollars) Below Poverty Line Lowest 3.8 19000000 9500 YES Second 9.6 48000000 24000 YES Middle 15.0 75000000 37500 YES Fourth 22.7 113500000 56750 NO Higest 48.9 244500000 122250 NO

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