mathxl.com Econ-201-G 12:30-1:50 pm FA-2017 Stanislas Setondjì 12/11/17 9:35 AM
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mathxl.com Econ-201-G 12:30-1:50 pm FA-2017 Stanislas Setondjì 12/11/17 9:35 AM Quiz: Chapter 7 Quiz Submit Quiz This Question: 5 pts 7 of 18 This Quiz: 36 pts possible oh Assume a society consists of two economic groups: one group is rich and the other group is poor. Suppose that 50 percent of the popuiation is rich while the other 50 percent of the population is poor. Consider two scenarios. Scenario A: The rich have $75,000 each, while the poor have $3,000 each. Scenario B: The rich have $8,000 each, while the poor have $850 each. If you only care about average income and not about equity, you would prefer dollar.) Now suppose that you only care about equity or inequality. In this case, you would prefer |.which has an average income of S.(Enter your response tothe nearest which has a rich-to-poor ratio of (Round your response to one decimal place) Finally, suppose you only care about living standards. In this case, you would prefer -because it has lower poverty. Enter your answer in each of the answer boxes. Save for LaterExplanation / Answer
SCENARIO A
Suppose there are 100,000 people in the economy.
Income of 50,000 rich people= $75,000*50,000= 3,750,000,000
Income of 50,000 poor people= $3,000*50,000= 150,000,000
Thus, Average income = Area’s total income/total population
= 3,90,00,00,000/100,000= 39,000
SCENARIO b
Income of 50,000 rich people= $8,000*50,000= 400,000,000
Income of 50,000 poor people= $850*50,000= 4,25,00,000
Thus, Average income = Area’s total income/total population
= 44,25,00,000/100,000= 4,425
hence, Scenario A would be preferred which has a higher average income of $39,000
Scenario A has lower poverty as the poors are getting $3,000 each. Scenario B has lower gap between the rich and poor ($7,150) however, the gap between rich and poor is much higher in scenario A ($72000)
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