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Chapter 30: Q.14 (page 690)

Now suppose that in the situation described in Problem 30-13, the distribution of income changes in such a way that A increases to one-third of the area denoted B. What is the new value of the Gini coefficient?

Short Answer

Expert verified

the new value of the Gini coefficient is25%

Step by step solution

01

Given Information

The Gini coefficient is the proportion of the region between the line of amazing equity and the line of inequality. Greater inequality implies a higher coefficient as well as the other way around.

02

Explanation

Calculating the Gini coefficient,

A/(A+B)

Area of A = 13Area of B

鈬�B=3A

A/(A+B)=A/4A=1/4=0.25=25%

Hence the new value of the Gini coefficient is25%

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Most popular questions from this chapter

Distinguish among alternative approaches to measuring and addressing poverty.

Based on your answers to Problems 30-13 and 30-14, when A increased, did the degree of income inequality increase or decrease? Explain why your answer makes sense by referring to the implied change in the shape of the Lorenz curve.

A government agency determines that the entire community discussed in Problem 30-10 qualifies for a special program in which the government will pay for a number of health care services that most residents previously had not consumed. Many residents immediately make appointments with the community physicians' group. Given the information in Problem 30-10, what is the likely effect on the profit-maximizing price and the equilibrium quantity of health care services provided by the physicians' group in this community?

Identify the key determinants of income differences across individuals and discuss theories of the desired income distribution.

The area labelled A is one-fourth of the area denoted B. What is the value of the Gini coefficient?
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