Quintile Percent Share

Lowest quintile 3.3%

Second quintile 8.2%

Third quintile 14.3%

Fourth quintile 23.2%

Highest quintile 51.0%

Highest 5% 21.9%

a. Carefully describe how to graph the Lorenz curve. Make sure to describe the axes and the important points on the curve in order to receive full credit.

b. Explain how to find the Gini coefficient.

c. U.S's national income is about $15 trillion in 2014. What is the approximate dollar income of the bottom 20%? Bottom 40%?

d. U.S.s population is approximately 300 million. Suppose that each household makes the average income for its quintile. What is the level of poverty if the poverty line is $10,000 per capita? Calculate the number of poor people, the headcount index, TPG, APG and AlS. e. Suppose one percent of national income were transferred from the richest 20% of households to the poorest 20% of households. Show the effect on relative inequality and poverty.