Income Distribution

Review Problems

Problem 1.1: If there are only five people in a certain economy, and their weekly paychecks are $100, $300, $600, $1000, and $1600, what is the cumulative percentage of income generated by the bottom 60% of wage earners? [Solution]

Problem 1.2: How is the Lorenz curve used to generate a numerical representation of income inequality? [Solution]

Problem 1.3: If the area between an economy's Lorenz curve and the straight-line equal distribution curve is 2 units, and the area beneath the Lorenz curve is 4 units, what is the Gini coefficient for this economy? [Solution]

Problem 1.4: Why does an economy with a higher Gini coefficient have a less equal income distribution? [Solution]

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