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Economics
Economics Today
Chapter 30
Q.30.1 - Learning Objectives

Chapter 30: Q.30.1 - Learning Objectives (page 668)

Describe how to use a Lorenz curve to represent a nation's income distribution

Short Answer

Expert verified

The Lorenz curve is the realistic technique for concentrating on scattering. Showing the degree of takeoff scattering between equivalent appropriation and real dispersion of a variable is utilized.

Step by step solution

01

Given Information

The Lorenz curve is the realistic technique for concentrating on scattering. Showing the degree of light scattering between equivalent circulation and real dissemination of a variable is utilized.

02

Explanation

On the X-axis the bent line shows the combined level of workers, positioned from least fortunate to most extravagant, against the aggregate level of all-out pay on the Y-axis. This is the Lorenz bend.

The Lorenz Curve is contrasted with the line of ideal balance to show the degree of pay and abundance disparity in a country.

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Most popular questions from this chapter

How might a state such as Arkansas adjust its administration of income maintenance programs to reduce or eliminate the marriage penalty? (Hint: What if the state were to base programs' benefits on total dollars of income received by both adults combined whether or not they were married?)

Consider the graph nearby, which depicts Lorenz curves for countries X, Y, and Z.

a. Which country has the least income inequality?

b. Which country has the most income inequality?

c. Countries Y and Z are identical in all but one respect: population distribution. The share of the population made up of children below working age is much higher in country Z. Recently, however, birthrates have declined in country Z and risen in country Y. Assuming that the countries remain identical in all other respects, would you expect that in 20 years the Lorenz curves for the two countries will be closer together or farther apart? (Hint: According to the age-earnings cycle, what typically happens to income as an individual begins working and ages?)

Explain why the productivity standard for the distribution of income entails rewarding people based on their contribution to society's total output. Why does the productivity standard typically fail to yield an equal distribution of income?

In which the poverty rate has risen in some years and fallen in others but since 1985 has tended to lie in a range between 10 percent and just over 15 percent. If the government's official poverty rate has been based on an absolute measure of poverty instead of a relative measure, would the data plot have tended generally to have sloped upward over time or to have sloped downward? Explain.

Why do you suppose that choosing other increments besides \(15,000 or \)30,000 can yield even more distributional variations of households within these seven income groupings?

(Hint: what do you think could happen if one were to broaden the income increments to \(100,000 or narrow them to \)5,000 while holding the number of income groups equal to seven?)

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