Problem 2
Assume that \(A I\), Beth, Carol, David, and Ed receive incomes of \(\$ 500, \$ 250, \$ 125, \$ 75,\) and \(\$ 50,\) respectively. Construct and interpret a Lorenz curve for this five-person economy. What percentage of total income is received by the richest quintile and by the poorest quintile? LO23.1
Problem 3
How does the Gini ratio relate to the Lorenz curve? Why can't the Gini ratio exceed 1 ? What is implied about the direction of income inequality if the Gini ratio declines from 0.42 to \(0.35 ?\) How would one show that change of inequality in the Lorenz diagram? LO23.1
Problem 4
Why is the lifetime distribution of income more equal than the distribution in any specific year? LO23.1
Problem 5
Briefly discuss the major causes of income inequality. With respect to income inequality, is there any difference between inheriting property and inheriting a high IQ? Explain. LO23.2
Problem 7
Should a nation's income be distributed to its members according to their contributions to the production of that total income or according to the members' needs? Should society attempt to equalize income or economic opportunities? Are the issues of equity and equality in the distribution of income synonymous? To what degree, if any, is income inequality equitable? LO23.4
Problem 11
What are the essential differences between social insurance and public assistance programs? Why is Medicare a social insurance program, whereas Medicaid is a public assistance program? Why is the earned-income tax credit considered to be a public assistance program? \(L O 23,6\)
Problem 13
Males under the age of 25 must pay far higher auto insurance premiums than females in this age group. How does this fact relate to statistical discrimination? Statistical discrimination implies that discrimination can persist indefinitely, while the taste-for-discrimination model suggests that competition might reduce discrimination in the long run. Explain the difference. LO23.7
Problem 14
Use a demand-and-supply model to explain the impact of occupational segregation or "crowding" on the relative wage rates and earnings of men and women. Who gains and who loses from the elimination of occupational segregation? Is there a net gain or a net loss to society? Explain. LO23.7
