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Income distribution. An economist produced the following Lorenz curves for the current income distribution and the projected income distribution 10 years from now in a certain country:
f(x) = 0.1x + 0.9x2 Current Lorenz curve
g(x) = x1.5 Projected Lorenz curve
(A) Graph y = x and the current Lorenz curve on one set of coordinate axes for [0, 1] and graph y = x and the projected Lorenz curve on another set of coordinate axes over the same interval.
(B) Looking at the areas bounded by the Lorenz curves and y = x, can you say that the income will be more or less equitably distributed 10 years from now?
(C) Compute the Gini index of income concentration (to one decimal place) for the current and projected curves. What can you say about the distribution of income 10 years from now? Is it more equitable or less?
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