The same options in the second box 1. Income inequality and the poverty rate The

Question

The same options in the second box

1. Income inequality and the poverty rate The following table summarizes the income distribution for the town of P which has a population of 10,000 people. Every individua within an income group earns the same income, and the total annual income in the economy is $500,000,000. Suppose that in 2006, the poverty line is set at an annual income of $43,275 for an individual. Share of Total Income in Perkopia (Percent) Year Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Highest Quintile 1994 3.2 8.0 14.0 21.8 53.0 2000 3,5 9.0 14,9 22.4. 50.2 2006 3.8 9,6 22.7 48.9 10.0 2012 4.0 6,5 24.0 45.5 The data in the table suggest that there was income inequality from 1994 to 2012. a decrease in no evidence of Complete the following table to help you determ in Perkopia in 2006. To do this, begin by determining the total income of all no change in individuals in each quintile using the fact that in the economy is $500,000,000. Next, determine the income of an individual in each quintile by dividing the total income of th an increase in umber of people in that quintile. (Hint: Recall that Perkopia as a population of 10,000 people.) Finally, determine whether the ncome for each quintile falls below the poverty line of $43,275. Share of Income in 2006 Total Income Individual Income

Explanation / Answer

Decrease in inequality.

total income is 500000000

Poverty rate is 60% of total population.

State ment one and statement 3 is correct.

Quantile Share of income Total income Total individual Below poverty line 1st 3.8 19000000 9500 Yes 2nd 9.6 48000000 24000 Yes 3rd 15.0 75000000 37500 Yes 4th 22.7 113500000 56750 NO Highest 48.9 244500000 122250 NO

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