APPLYING ECONOMIC THINKING 1. Ten individuals work in a dry-cleaning plant. The total wage bill is $100 000 per year. So

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APPLYING ECONOMIC THINKING
1. Ten individuals work in a dry-cleaning plant. The total wage bill is $100 000 per year. Some employees work part-time while others work full-time. Here are the 10 annual salaries:
Individual A = $1 000; B = $6 000; C = $12 000; D = $8 000; E = $10 000; F = $11 000; G = $20 000; H = $14 000; I = $16 000; J = $2 000.
a) What is the mean average salary?
b) What is the median salary?
c) Group the salaries into quintiles, with the first quintile including the two lowest-paid workers, and so on.
d) Determine the percentage each quintile receives of the total wages paid by the plant.
e) Construct a Lorenz curve to illustrate the income distribution in the dry-cleaning plant. What does this curve indicate about income distribution?
2. Reproduce the Lorenz curve shown in Figure 18.4. Using the information provided by Figure 18.5, construct a set of colour-coded Lorenz curves (1951 to 2017) to assess whether or not income distribution in Canada has improved since the middle of the twentieth century.
3. Use Figure 18.7 to compare income inequality in selected countries. How does Canada compare with developing countries like Brazil, Mexico, and South Africa? How does Canada compare with other economically developed countries?
FIGURE 18.4 Lorenz curve of income distribution in Canada, 2000 and 2017 Compare this method of presenting data with the bar graph in Figure 18.2. 100 2000 2017 E 80 60 Cumulative percentage of income D Complete equality line 40 с inequality line 20 А 0 B Complete 20 40 60 80 100 Cumulative percentage of families
FIGURE 18.5 Distribution of family income in Canada, 1951-2017 How do you think the Lorenz curves for these historical data would compare with the recent curves in Figure 18.4? Source: Statistics Canada, Income Distribution by Size in Canada, as reproduced in David Stager, Economic Analysis and Canadian Policy (Toronto: Butterworths, 1992). 618, and CANSIM Table 378-0152, 2017. 1951 1961 1971 1981 1990 2010 2017 Total Income Received by Each Quintile of the Population (%) 6.1 6.6 5.6 6.4 6.5 6.7 6.7 Lowest income quintile of families 12.9 13.4 12.7 12.8 12.6 12.4 12.4 Second quintile 17.4 18.2 18.0 18.3 17.8 16.9 16.6 Third quintile 22.5 23.4 23.7 24.1 23.8 22.8 22.9 Fourth quintile 41.1 38.4 40.0 38.4 39.3 41.2 41.4 Highest income quintile All families 100.0 100.0 100.0 100.0 100.0 100.0 100.0
FIGURE 18.7 Lorenz curves of income distribution in different countries, circa 2015 How do these curves, based on the data in Figure 18.6, help to identify countries with more and less equitable distributions of national incomes? 100 80 Norway Canada 60 Cumulative percentage of income 40 - United States Mexico Brazil 20 South Africa 0 20 40 60 80 100 Cumulative Percentage of people