Question

Inhabitant	Total Income (LCU) of Each inhabitant /200
1	2
2	5
3	8
4	11
5	14
6	26
7	29
8	31
9	34
10	40

Question 2 Suppose that there are 10 inhabitants in Country A, where income is distributed as follows in Country A:

a) Using the data in table above and assuming that the Poverty Gap Ratio is 0.6 and that there are 5 individuals living under the poverty line. Calculate the poverty line, the head count index and the Pα measures when α=1 and when α=2.

b) Suppose that you were to take 1 unit of income away each from individuals 8, 9 and 10 and give them to individuals 3, 4 and 5. If the poverty line is the same as in (b), calculate the new head count index, the new poverty gap index and the new Pα measures when α=1 and when α=2

Answer 1