Income percentile ranks are numbers from 0 to 100 that indicate where you sit in the income distribution - for example, 75 would mean you earn more income than three quarters of people, but less than the top quarter. Let's assume a child's expected income percentile is a linear function of their parents' income percentile. It turns out the intercept is enough to pin down the slope. Do you see why? If the intercept is 20 - which means the lowest-income parents have children who end up at the 20-th percentile, on average - what is the slope?

fofopausiomiava 2022-10-06 Answered
Income percentile ranks are numbers from 0 to 100 that indicate where you sit in the income distribution - for example, 75 would mean you earn more income than three quarters of people, but less than the top quarter. Let's assume a child's expected income percentile is a linear function of their parents' income percentile. It turns out the intercept is enough to pin down the slope. Do you see why? If the intercept is 20 - which means the lowest-income parents have children who end up at the 20th percentile, on average - what is the slope?
This problem is from an app called probability puzzles.
My approach: I realised y = a x + b could be the line for child but we don't have any information about the slope. We know that percentile is uniformly distributed between 0 and 100 so expected value is 50 but I don't see how to proceed from here.
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Answers (1)

Radman76
Answered 2022-10-07 Author has 7 answers
Step 1
I agree with your linear function: y = a x + b, where x is the ith parents' income percentile. And y is the child's expected income percentile. Then the crucial information are
If the intercept is 20 - which means the lowest-income parents have children who end up at the 20th percentile, on average.
This give us the equation y ( 0 ) = 20. A child cannot end up below the 20th percentile: y ( 0 ) = a 0 + b = b = 20.
Step 2
Then the highest income parents percentile ( x = 100) can have children who end up at the highest income percentile ( y = 100), on average. It cannot be more, since the codomain of the percentile is between 0 and 100. Thus the equation is
100 = a 100 + 20
Finally, calculate the value of a.
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