Answered: The term obtained by dividing the area…

The term obtained by dividing the area of inequality shown by a Lorenz curve by the area of the right-triangle formed by the axes and the diagonal (the line of equality).

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter28: The Distribution Of Income And Poverty

Section: Chapter Questions

Problem 10QP

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What is measured on the two axes of a Lorenz curve?
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Imagine an economy with only two people. Larry earns $20,000 per year, while Roger earns $80,000 per year. As shown in the following figure, the Lorenz curve for this twoperson economy consists of two line segments. The first runs from the origin to point a, while the second runs from point a to point b. a. Calculate the Gini ratio for this two-person economy using the geometric formulas for the area of a triangle (= ½ × base × height) and the area of a rectangle ( = base × height). (Hint: The area under the line segment from point a to point b can be thought of as the sum of the area of a particular triangle and the area of a particular rectangle.) b. What would the Gini ratio be if the government taxed $20,000 away from Roger and gave it to Larry? (Hint: The figure will change.) c. Start again with Larry earning $20,000 per year and Roger earning $80,000 per year. What would the Gini ratio be if both their incomes doubled? How much has the Gini ratio changed from before the doubling…
https://data.oecd.org/inequality/income-inequality.htm
What is income inequality in economics. Define it with the help of example.
Which of these is true of the Lorenz curve? The further away it is from the 45 degree line the more unequal is distribution. The closer it is to the 45 degree line the more unequal is distribution.
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The graph below shows the Lorenz curves of two different countries stylistically called ‘red’ and ‘green’. The two countries report equal Gini coefficients indicating equal measures of income inequality. However, several experts argue that the green country is less unequal than the red country. Explain the criteria used to make such an argument.
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Consider the Lorenz curves for income for Deneb and Elnath as shown in this figure: Lorenz curves for Deneb and Elnath cumullative income share (%) 8 8 2 2 2 2 2 2 2 2 100 90 80 70 60 40 30 Lorenz curve for Elnath 0 0 10 20 30 40 50 60 70 80 90 100 income percentiles Lorenz curve for Deneb [If the image above doesn't appear click here to open it in a new tab.] Which of the following statements is true? [Hint: You do not need to calculate any areas to answer this question correctly!] The relative income inequalities of Deneb and Elnath cannot be determined from the information given. Income inequality is more extreme in Deneb than it is in Elnath. Deneb and Elnath have the same degree of income inequality. Income inequality is more extreme in Elnath than it is in Deneb.