ECONOMICS
INCOME DISTRIBUTION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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space between the Lorenz Curve and perfect equality
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The Gini Coefficent translated to be out of 100
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The Gini Coefficent multiplied by the Lorenz Curve
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None of the above
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Detailed explanation-1: -The Gini index measures the area between the Lorenz curve and a hypothetical line of absolute equality, expressed as a percentage of the maximum area under the line. Thus a Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality.
Detailed explanation-2: -The Gini coefficient is the area between the Lorenz curve of the income distribution and the diagonal line of complete equality, expressed as a proportion of the triangular area between the curves of complete equality and inequality.
Detailed explanation-3: -Plotted as a Lorenz curve, complete equality would be a straight diagonal line with a slope of 1 (the area between this curve and itself is 0, so the Gini coefficient is 0). A coefficient of 1 means that one person earns all of the income or holds all of the wealth.
Detailed explanation-4: -The Gini index is calculated as the ratio of the area between the perfect equality line and the Lorenz curve (A) divided by the total area under the perfect equality line (A + B).
Detailed explanation-5: -If a larger proportion of events occur in lower neighbourhood income quintile groups, the Lorenz curve will bend above the line of equality; if a larger proportion of events occur in higher neighbourhood income quintile groups, the Lorenz curve will bend below the line of equality (Lorenz, 1905).
