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Suppose we have a simple society with only 2 people. 1 person is rich and earns $100,000 per year. 1 person is poor and earns $25,000 per year
a) What percentage of total income does the rich person earn?
b) Now suppose that the rich person's income is growing at 2% per year, and the poor person's income is growing at 5% per year. Calculate the income of both people after 1 year. Has the absolute gap between rich and poor increased or decreased?
c) After 1 year what percentage of total income does the rich person earn?
d) If these growth rates were to continue for many years, what would we expect to happen in this society?
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