Use the following table to work Problems 9 and 10 . The...

Use the following table to work Problems 9 and 10 . The table shows the distribution of money income in India in 2010 $$\begin{array}{lc} \begin{array}{l} \text { Households } \\ \text { (quintile) } \end{array} & \begin{array}{c} \text { Money income } \\ \text { (percentage of total) } \end{array} \\ \hline \text { Lowest } & 8.6 \\ \text { Second } & 12.4 \\ \text { Third } & 15.8 \\ \text { Fourth } & 20.8 \\ \text { Highest } & 42.2 \end{array}$$ a. What is the definition of money income? Why does money income tend to be more equally distributed than market income? b. Draw the Lorenz curve for the distribution of money income in India.

Use the following table to work Problems 9 and 10 . The table shows the distribution of money income in India in 2010
$$\begin{array}{lc}
\begin{array}{l}
\text { Households } \\
\text { (quintile) }
\end{array} & \begin{array}{c}
\text { Money income } \\
\text { (percentage of total) }
\end{array} \\
\hline \text { Lowest } & 8.6 \\
\text { Second } & 12.4 \\
\text { Third } & 15.8 \\
\text { Fourth } & 20.8 \\
\text { Highest } & 42.2
\end{array}$$
a. What is the definition of money income? Why does money income tend to be more equally distributed than market income?
b. Draw the Lorenz curve for the distribution of money income in India.

Key Concepts

Money Income

Money income refers to all the cash earnings of an individual or household obtained from labor, investments, and government transfers. It is the income that is received in monetary form, making it easier to measure and analyze compared to non-cash benefits such as employer-provided services or in-kind transactions.

Market Income

Market income is the income earned solely from market transactions such as wages, dividends, and business profits before any government intervention like taxes or transfers. It typically shows more inequality because it does not incorporate the redistributive effects of government policies that can equalize income distributions.

Lorenz Curve

The Lorenz curve is a graphical representation used to illustrate the distribution of income or wealth within a population. It plots the cumulative percentage of total income received against the cumulative percentage of recipients, arranged from the poorest to the richest, and is instrumental in visualizing and analyzing income inequality.

Income Quintiles

Income quintiles divide a population into five equal groups based on income levels. This division helps in comparing income distribution across different segments of the population by showing how income is shared among the poorest 20% through to the richest 20%, thus providing insights into economic inequality.

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