Question

2. Gini Index Income Decile Income Share 0.05 0.1 0.15 0.2 0.25 0.35 un 0.45 1 a. Graph the Lorenz Curve for the table above. (If it helps to be more precise than the table: the Lorenz curve has a slope of 0.05 from 0 to 0.5 of the income distribution, a slope of 0.1 from 0.5 to 0.8 on the income distribution, and a slope of 0.2 from 0.8 to 1 on the income distribution) b. Calculate the Gini Index. (Hint: use your geometry skills.)

Answer 1

Solution 2.

Income Decile	Income Share
1	0.05
2	0.1
3	0.15
4	0.2
5	0.25
6	0.35
7	0.45
8	0.6
9	0.8
10	1

The graph has been drawn using excel which is given below:-

Lorenz Curve 120% 100% 80% 60% 40% 1 2 3 4 5 6 7 8 9 10 Income Percentage - Income Equality case

It is known that the Gini coefficient with value 0 represents perfect equality whereas the Gini coefficient with value 1 represents perfect inequality. Gini coefficient generally lied between 0 and 1.

Gini coefficient = area inside the Lorenz curve/ area of the entire region of triangle

= 2000/5000 [using formule of triangle]

CINI CO-EFFICIC - A A+B → % Pop

= 0.40