1. The table below above the distributions of income in two states (A and B) and in two sub-regions (rural and urban) of each state, in a country. Every individual in these states lives in a household of size one and has an income of exactly 100, 200, or 10,000 dollars per year (so it is easy to describe the distributions and calculate poverty statistics). The first two sections of the table present the numbers and percentages of individuals in each region at each income level.

a) Fill in the two rows of poverty statistics in each of the last two sections of the table. For the first of these sections, use a poverty line of $201. For the last, use a poverty line of $101.

b) Suppose attention is restricted to headcount ratio statistics employing a poverty line of $201. Representatives of State A are attempting to argue that their state should be given priority in the allocation of poverty alleviation funds. Would they prefer to employ statistics calculated at the state level (columns 3 and 6) or sub-region level (columns 1, 2, 4, and 5)? Why?

State A State B Urban Rural Total Urban Rural Total Population 10,000 10,000 20,000 10,000 90,000 100,000 (Number of people) Number of People with Income of: $100 0 0 0 0 45,000 45,000 $200 2,000 6,000 8,000 2,000 0 2,000 $10,000 8,000 4,000 12,000 8,000 45,000 53,000 Percentage of Population with Income of: $100 0 0 50 45 $200 20 60 40 20 0 2 $10,000 80 40 60 80 50 53 Poverty Statistics Using Poverty Line of $201: Headcount ratio (%) Total Income Gap ($) Poverty Statistics Using Poverty Line of $101: Headcount ratio (%) Total Income Gap ($)