HomeAs7 - Fall 2010 - Answer Key

HomeAs7 - Fall 2010 - Answer Key - 1. (10 points.) Draw...

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1. (10 points.) Draw Lorenz curves and calculate Gini coefficient and the coefficient of variation for 2 income distributions below. Which distribution is more unequal? Distribution A: (100, 200, 300, 400); (50, 25, 100, 25) Distribution B: (100, 500, 550, 850); (100, 50, 200, 50) Note that the first set of numbers represents the various incomes; whereas the second set of numbers represents the number of people earning each of these incomes. For example, from Distribution A information, there are 50 people with the income of \$100, 25 people with the income of \$200, etc. Answer: The Lorenz Curves: To build a Lorenz curve for each distribution, you need to use several points (cumulative population, cumulative income) based on the distribution characteristics: Distribution A Category # people Individual Income Group Income 1 50 100 5000 2 25 200 5000 3 100 300 30000 4 25 400 10000 Total 200 50000 Average 250 Lorenz Curve Categories considered together Cumulative Population,% Cumulative Income,% 0 0 0 1 25 10 1,2 37.5 20 1,2,3 87.5 80 1,2,3,4 100 100

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This note was uploaded on 12/02/2010 for the course ECON 3T03 taught by Professor Demidova during the Fall '10 term at McMaster University.

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HomeAs7 - Fall 2010 - Answer Key - 1. (10 points.) Draw...

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