1. What does it mean to be in the bottom quintile of the income distribution? Be sure to give the general definition of a quintile in your answer.

2. What does it mean to be in the top quintile of the income distribution? Be sure to give the general definition of a quintile in your answer.

Use the image below to answer questions 3, 4, and 5.

3. Given the markets illustrated below, write a sentence(s) using the terms supply and demand to explain why high skill workers have a higher wage than low skill workers.

4. Suppose that there is an increase in demand for high skill workers. There is no change in the market for low skilled workers. What will happen to the wage of high skill workers? Explain.

5. Given the change noted in #4, what will happen to income inequality in this economy? Explain.

6. A section of the text discusses "Causes of Growing Inequality: The Changing Composition of the American Households." Consider this idea discussed by Tyler Cowen in his NYTimes article: "These days, an investment banker may marry another investment banker rather than a high school sweetheart, or a lawyer will marry another lawyer, or a prestigious client, rather than a secretary. Whether measured in terms of income or education, there are more so-called power couples today than in the past, one manifestation of a phenomenon known as assortative mating, or more generally the pairing of like with like."

What happens to income inequality when high skill workers pair with other high skill workers (increasing the number of "power couples") instead of a high skill worker pairing with a low skilled worker?