The above table shows the distribution of income in two imaginary ...

[ahriuashd]

The above table shows the distribution of income in two imaginary countries, Alpha and Beta.
 
  a) What does the table tell you about the second 20 percent group in each country?
  b) Calculate the cumulative percentage for both countries.
  c) Interpret the cumulative percentage for the third 20 percent group in both countries.

Question 2

The figure above shows one of Bob's indifference curves for CDs and books.
 
  a) Is the indifference curve steeper at point a or point b?
  b) What is Bob's marginal rate of substitution at point a?
  c) What is Bob's marginal rate of substitution at point b?

[Smiles0805]

Answer to Question 1

a) The second 20 percent group earns 10 percent of the income in country Alpha and 6 percent of the income in country Beta.

Household percentage Cumulative percentage of income Alpha Cumulative percentage of income Beta
Lowest 20 percent 5 3
Second 20 percent 15 9
Third 20 percent 35 21
Fourth 20 percent 65 45
Highest 20 percent 100 100

b) The table above has the cumulative percentages.
c) In country Alpha, the poorest 60 percent of households earns 35 percent of income. In country Beta, the poorest 60 percent of households earns 21 percent of income.

Answer to Question 2

a) The indifference curve is steeper at point a.
b) The marginal rate of substitution at point a is 5 CDs per book, the slope of the line that just touches the indifference curve at this one point.
c) The marginal rate of substitution at point b is 1 1/2 CDs per book, the slope of the line that just touches the indifference curve at this one point.

[ahriuashd]

Thank you

[Smiles0805]

No problemo