Chapter 15 or 28 Income Distribution and Poverty: Pre-Class & In-Class Activities Packet Name/I.D. Number: Section: Date: Part 4. Economic Equations and Graphs 3. a. In the graph below, using Lorenz curve 2 (LC2), approximately what Answer questions 1 and 2 based on Exhibit 2 below: percentage of income goes to the second-highest 20 percent of households? (Hint: first, find the cumulative percentage of Income for 80% 60 Exhibit 2 Distribution of Household Income Shares, 1967 & 2015. of cumulative households and then, find the cumulative percentage of 43.8 Income for 60% of cumulative households). 40 Percentage of Total Income ( 30 b. Which Lorenz curve represents better income distribution, LC, or LCz? 20 Why? 17.3 10.8 10 c. Calculate the Gini Coefficient for Lorenz Curve 1 (LC,), assuming that Lowest Second Third Fourth Highest the size of area "a" is 20 square inches and the size of area "b" is 40 square Fifth Fifth Fifth Fifth Fifth (Bottom (Second (Third (Fourth (TOP inches, i.e. the size of area "a" is 1/2 of the size of area "b"(Hint: use the Quintile) Quintile) Quintile) Quintile) Quintile) 1967 formula and the example on page 6 to calculate GC.) 100 6 8 8 6 8 8 Percentage of Total Income (6) Line of Perfect Income 14,3 80 Equality 8.2 o Lowest Second Thire Fourth Highest Fifth Fifth Fifth Fifth Fifth 60 (Bottom Second (Third (Fourth (Top Quintile) Quintile) Quintile) Quintile) Quintile) Cumulative Percentage of Income 2015 40 prenz Curve 1 1. Compare the U.S. income distribution in 1967 with the income distribution in 2015. Which quintile(s) (group(s)) has/have shown decrease? Increase? Why? 20 Lorenz Curve 2 2. Compare the percentage of total money income received by U.S. households between 1967 & 2015? What is the percentage change in the O 20 40 60 80 100 money income received in 2015 as compared to 1967 for the top fifth? Cumulative Percentage of Households Why