**Text Transcription for Educational Website:****a) Drawing the Lorenz Curve:**With the following data, we can construct a Lorenz Curve, which is a graphical representation of income distribution within a population. | % of Population | % of Income ||---------------------|-------------|| Lowest 20% | 6.1 || Second lowest | 13.3 || Middle 20% | 17.0 || Second highest | 22.0 || Highest 20% | 41.6 |**Explanation of the Lorenz Curve:**The Lorenz Curve illustrates the proportion of total income earned by cumulative percentages of the population. If income were perfectly equally distributed, the Lorenz Curve would be a 45-degree line (also known as the line of equality). Deviations from this line indicate inequality in income distribution—the more bowed the curve, the higher the level of inequality.**b) Calculating the Gini Coefficient:**To calculate the Gini Coefficient from the Lorenz Curve, one typically measures the area between the line of equality (the 45-degree line) and the Lorenz Curve itself. The Gini Coefficient is the ratio of this area to the total area under the line of equality. It ranges from 0 to 1, where 0 signifies perfect equality and 1 indicates maximum inequality. The Gini Coefficient provides a numerical measure to summarize the income distribution summarized by the Lorenz Curve.This analysis helps in understanding economic inequality within a specific area or population, aiding policymakers and researchers in decisions and studies related to wealth distribution.

Lorenz Curve is the graphical representation of distribution of income or wealth.

a) With the following data draw a Lorenz Curve. Explain what the Lorenz Čurve illustrates, and what the results mean. % of population % of income Lowest 20% 6.1 Second lowest 13.3 Middle 20% 17.0 Second highest 22.0 Highest 20% 41.6 b) Now explain how one gets the Gini Coefficient from the Lorenz Curve, and what information the coefficient provides.

a) With the following data draw a Lorenz Curve. Explain what the Lorenz Čurve illustrates, and what the results mean. % of population % of income Lowest 20% 6.1 Second lowest 13.3 Middle 20% 17.0 Second highest 22.0 Highest 20% 41.6 b) Now explain how one gets the Gini Coefficient from the Lorenz Curve, and what information the coefficient provides.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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