If we assume that there are 100 households in the economy and that total income to be distributed across those households is $4000 (per day) and if the 20% poorest households earn $15 per day and the 60% middle income households earn $25 per day, what is the cumulative income earned by the RICHEST 20% of households?

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BlackTom AI · Accepted Answer

We start by outlining the given data and what is being asked. There are 100 households in total, and total income across all households is 4000 per day. The 20% poorest households amount to 20 households, each earning 15 per day, and the 60% middle-income households amount to 60 households, each earning 25 per day. Our goal is to determine the cumulative income earned by the richest 20% of households, i.e., the top 20 households by income.

First, compute the total income of the poorest group: 20 households × $15 = $300.
Next, compute the total income of the middle group: 60 households × $25 = $1500.
Add these amounts to see how much income is already allocated to the bottom 80 households: $300 + $1500 = $1800.
Subtract this from the overall total income to find the income of the richest 20 households: $4000 − $1800 = $2200.

Thus, the richest 20 households together earn $2200 per day. To understand the share of total income, compute 2200 out of 4000: 2200 ÷ 4000 = 0.55, which is 55% of the total income.

If you are checking consistency, note that the problem’s partition by percent (20%, 60%, and remaining 20%) aligns with 20 households in the richest group. The arithmetic confirms that the top quintile’s total income is $2200, representing 55% of the daily income distributed among all 100 households.

ECON1002 Introductory Macroeconomics

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