Table 21P-3 shows the incomes of 10 households in two different years, 2020 and 2030. Each household makes a choice in 2020 about how many years of education they will acquire. Suppose each year of education costs $2,000 and households can acquire a maximum of six years of education. For the sake of simplicity, suppose that there is no risk in education. Each year of education will increase your 2030 income by $3,000. Otherwise, your 2030 income will be the same as your 2020 income. Finally, suppose you need at least $2,000 to survive.

a. Fill in the three remaining columns in the table.

b. What is the percentage of total societal income held by the lowest quintile in 2020?

c. What is the percentage of total societal income held by the lowest quintile in 2030?

d. How is this an example of a poverty trap?