Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 20 - Part VI - Income Inequality and Poverty - Problems and Applications - Page 431: 4

Answer

a) Community 2 has a more unequal distribution of income, and poverty is more likely to be an issue in Community 1. b) Community 2 c) Community 1 d) Someone might prefer the opposite preference if they would prefer the worst off families to be as best off as possible (the maximin criterion).

Work Step by Step

a) The first community has a ratio of 5:1 (richest family to poorest family), while the second community has a ratio of 9.09:1 (richest family to poorest family). However, poverty affects the families with the lowest income more than a high income family. b) The poorest family in Community 2 is better off than the poorest family in Community 1. Rawls wants to make the worst off family in any community as best as possible (the maximin criterion). c) I prefer the income distribution that has a lower ratio.
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