The government of a small country is planning sweeping changes in the tax structure in order to provide a more equitable distribution of income. The Lorenz curves for the current income distribution and for the projected income distribution after enactment of the tax changes are as follows.f(x)=x2.1Current Lorenz curveg(x)=0.6x+0.4x2Projected Lorenz curve after changes in tax lawsFind the Gini index of income concentration for each Lorenz curve. Will the proposed changes provide a more equitable income distribution? Explain. Identify the integrand for the computation of the current and projected Gini indices. The current Gini index is given by2 ∫ 0 1 ....... dxand the projected Gini index is given by2 ∫ 0 1 ...... dx.

The income inequality is measured by GI( Gini index).The graph that shows the income inequality is…

Answered: The government of a small country is…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The government of a small country is planning sweeping changes in the tax structure in order to provide a more equitable distribution of income. The Lorenz curves for the current income distribution and for the projected income distribution after enactment of the tax changes are as follows.

f(x)	=	x^2.1	Current Lorenz curve
g(x)	=	0.6x+0.4x²	Projected Lorenz curve after changes in tax laws

Find the Gini index of income concentration for each Lorenz curve. Will the proposed changes provide a more equitable income distribution? Explain.

Identify the integrand for the computation of the current and projected Gini indices.

The current Gini index is given by

2 ∫ ₀ ¹ ....... dx

and the projected Gini index is given by

2 ∫ ₀ ¹ ...... dx.

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