Refer to Figure 18-9 to answer the following questions
a. Did the distribution of income become more equal in 2016 that it was in 2015, or did it become less equal? Explain.
b. If area A = 1,600, area B = 200, and area C = 3,200, calculate the Gini coefficient for 2015 and the Gini coefficient for 2016.
a. The distribution of income became more equal in 2016. The Lorenz Curve for 2016 is closer to the diagonal line of equality than is the Lorenz Curve for 2015.
b. The Gini Coefficient = (the area inside the Lorenz Curve)/(the area beneath the diagonal line of equality). Thus, for 2015, the Gini Coefficient = A + B/(A + B + C) = 1,800 /5,000 = 0.36. For 2016, the Gini Coefficient = (A)/(A + B + C) = 1,600 /5,000 = 0.32.
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