Question

A very small town has only 15 households and they have the following annual incomes:

$52,000, $22,000, $92,000, $8,000, $118,000, $62,000, $38,000, $14,000, $132,000, $46,000, $26,000, $96,000, $54,000, $110,000, $80,000.

Based on this information, answer the following:

a) Calculate the share of total income received by each quintile of this income distribution. Show your work!

b) Do the top and bottom quintiles in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution for 2011? Compared to the U.S. does this city have higher or lower income inequality?

(In 2011, the bottom quintile of the income distribution received 3.2% of income and the top quintile, 51.14%)

Answer 1

a)

Individual	Income	Quintile	Sum of each Quintile	% of each quintile from total Income
1	8,000	1st	44,000	4.6%
2	14,000
3	22,000
4	26,000	2nd	110,000	11.6%
5	38,000
6	46,000
7	52,000	3rd	168,000	17.7%
8	54,000
9	62,000
10	80,000	4th	268,000	28.2%
11	92,000
12	96,000
13	110,000	5th	360,000	37.9%
14	118,000
15	132,000
	950,000			100.0%

b) Bottom quintile in 2011 = 3.2%

Top quintile in 2011 = 51.14%

Bottom quintile in current year = 4.6%

Top quintile in current year = 37.9%

Bottom quintile have increased while top quintile have decreased which means income inequality have decreased from 2011 ro current year.