Income Distribution

# Income Distribution - percentages together at each level giving the amount of income earned by all people at or below a certain level In our

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Income Distribution Defining and Measuring Income Distribution For total income we will use the sum of the five average incomes: Total Income = 10000 + 24000 + 50000 + 80000 + 110000 Total Income = 274000 Next we find the percentage of total income that each segment of the population earns, by dividing their income by the total income: Bottom segment percentage = 10000/274000 = 0.036 = 3.6% Second segment percentage = 24000/274000 = 0.088 = 8.8% Third segment percentage = 50000/274000 = 0.182 = 18.2% Fourth segment percentage = 80000/274000 = 0.292 = 29.2% Top segment percentage = 110000/274000 = 0.401 = 40.1% What these figures indicate is that the bottom fifth of the population gets less than 4% of the total income, while the top fifth of the population gets over 40% of the total income, indicating a large degree of income inequality. Economists also look at cumulative figures for income distribution. To do this, simply add the

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Unformatted text preview: percentages together at each level, giving the amount of income earned by all people at or below a certain level. In our example, it would work as follows: Bottom segment cumulative percentage = 3.6% Second segment cumulative percentage = 3.6% + 8.8% = 12.4% Third segment cumulative percentage = 12.4% + 18.2% = 30.6% Fourth segment cumulative percentage = 30.6% + 29.2% = 59.8% Top segment cumulative percentage = 59.8% + 40.1% = 99.9% Note that the total cumulative percentage, which should be equal to 100%, since it represents the total income earned by all workers, is only 99.9%. This sometimes happens due to rounding of numbers. These two figures, percentage and cumulative percentage, are usually placed in a table for easier reading: Figure %: Income Distribution Table...
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## This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.

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Income Distribution - percentages together at each level giving the amount of income earned by all people at or below a certain level In our

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