In: Economics
The table below shows the distribution of income in the U.S. in
the year 1978.
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Refer to Table 19.1. What percentage of income is received by the bottom 20% of the households?
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According to Table 19.1, what percentage of income is received by the top 40% of the population?
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In the table above households are already divided into quintile that means divided into five equal groups according to the distribution of values of a particular variable which is income of households in above question.So we can rewrite the table above as follows;
Households Percentage of income
Lowest fifth= 1/5= 20/100 = lowest 20% of group (under $6,391) 4.3
Second fifth = second lowest 20% of group ($6,392 - $11,955) 10.3
Third fifth = Third lowest/ middle 20% of group ($11,956 - $18,122) 16.9
Fourth Fifth = Fourth lowest/ second top 20% of group ($18,122 - $26,334) 24.7
Top Fifth = Top 20% of household group ($26,335 and over) 43.9
1). Percentage of income is received by the bottom 20% of the households or by lowest fifth households is 4.3 percent. Hence the correct option is (d).
2). Percentage of income is received by the top 40% of the population is equal to percentage of income received by top 20% and second top 20% of households. So, adding the percentage of income received by top fifth/top 20% of household group and fourth fifth/second top 20% of group we get the percentage of income is received by the top 40% of the population.
Thus, Percentage of income is received by the top 40% of the population
= percentage of income received by top fifth household group + percentage of income received by fourth fifth group
24.7% + 43.9% = 68.6%.
Hence, percentage of income is received by the top 40% of the population is 68.6%, so the correct option is (e).