Econ 157 Problem Set Assignment Example | Topics and Well Written Essays - 500 words

Econ 157 Problem Set - Assignment Example These curves can cross in more than one place. Here an unequivocal statement regarding the income distribution of these two countries cannot be made. However Gini coefficient is a definite value between 0 and 1. If the Gini coefficient of country-one is greater than country- two it can be concluded that country two has comparatively a better income distribution compared to the country-1. Poverty headcount ratio indicates the percentage proportion of population which is below the poverty line set by the central bank. With increasing value of the denominator Po value of this equation can decline. Example: country’s poverty can increase at a lower rate compared to the total population growth while decreasing Po. Here the headcount of poor increase while the Po value decrease. Consumers spend a higher proportion of total household income to buy essential foods in poor countries. Therefore decreasing income can substantially decrease the calorie intake by the families in these countries. In developed countries consumers’ food basket includes non-essential foods and their utility is influenced by non-nutrient related concerns such as taste. Therefore income change can affect minimally to their calorie intake. In the above model measurement error is produced from the unobserved variables. In regression analyses it is assumed that unobserved factors are independent from the explanatory variables. However ability and schooling are correlated. Therefore biased estimates can be produced. In describing the differences in economic development across countries geography and institutions are commonly used. Geography argument states that localized environment determine the quality of factors of production such as land, labor, capital and technology available in different countries. Thus location specific characteristics such as climate, being landlocked, special linkages with other countries and endowment of natural resources