Tackle the Test: Free-Response Questions
Question
There are 100 households in the economy of Equalor. Initially, 99 of them have an income of $10,000 each, and one household has an income of $1,010,000.
What is the median income in this economy? What is the mean income?
Through its antipoverty programs, the government of Equalor now redistributes income: it collects $990,000 from the richest household and distributes it equally among the remaining 99 households.
What is the median income in this economy now? What is the mean income? Which indicator (mean or median household income) is a better indicator of the typical Equalorian household’s income?
Rubric for FRQ 1 (5 points)
1 point: median income = $10,000
1 point: mean income = $20,000
1 point: median income = $20,000
1 point: mean income = $20,000
1 point: median
Question
Again consider the economy of Equalor described in Question 1, in which the total income is $2 million.
Draw a correctly labeled graph showing the points on the Lorenz curve for the poorest 0%, 20%, 40%, 60%, 80%, and 100% of the population before the redistribution of income.
On the graph you have already drawn, repeat your answer to part a for the situation after the redistribution of income. Indicate the points that have changed with an “X”.
What is the Gini coefficient after the redistribution of income?(5 points)
Rubric for FRQ 2 (5 points)
1 point: The vertical axis is labeled “Cumulative percentage of income” and the horizontal axis is labeled “Cumulative percentage of population.”
1 point: The heights of the points at 0% and 100% of the population are 0% and 100% of the income, respectively.
1 point: The heights of the points at 20%, 40%, and 60% of the population are 10%, 20%, and 30% of the income, respectively.
1 point: The heights of the “X’s” at 20%, 40%, and 60% of the population are 20%, 40%, and 60% of the income, respectively.
1 point: The Gini coefficient after the redistribution is zero.